Statement of Cash Flows (Indirect Method) The Sweet Company’s income statement a
ID: 2551067 • Letter: S
Question
Statement of Cash Flows (Indirect Method)
The Sweet Company’s income statement and comparative balance sheets as of December 31 of 2013 and 2012 are presented below:
During the year, Sweet Company sold equipment for $27,000 cash that originally cost $57,000 and had $46,000 accumulated depreciation. New equipment was purchased for cash. Bonds payable and common stock were issued for cash. Cash dividends of $30,000 were declared and paid. At the end of the year, shares of treasury stock were purchased for cash. Accounts payable relate to merchandise purchases.
Required
a. Compute the change in cash that occurred during 2013.
b. Prepare a statement of cash flows using the indirect method.
a. Change in Cash during 2013 $Answer AnswerIncreaseDecrease
b. Use a negative sign with cash outflow answers.
Income Statement
For the Year Ended December 31, 2013 Sales Revenue $946,000 Cost of Goods Sold $507,000 Wages Expense 203,000 Depreciation Expense 60,000 Insurance Expense 13,000 Interest Expense 12,000 Income Tax Expense 57,000 Gain on Sale of Equipment (16,000) 836,000 Net Income $110,000
Explanation / Answer
Change in Cash During 2013: Opening Cash Balance 31000 Closing Cash Balance 23000 Decrease in Cash -8000 Sales Value 27000 Sweet Company Cash flow Statements Cost 57000 for the year ended Dec 31,2013 Less: AD 46000 Cash Flow from Operating Activities Book Value 11000 Net Income 110000 Gain On Sales 16000 Add (Deduct) items to convert net income to cash basis Depreciation 60000 Equipment Account Gain on Sale of Equipment -16000 To Bal BD 770000 By Sales 57000 Account Recievable -25000 To Purchase 174000 Inventory -51000 By Bal Cd 887000 Prepaid Insurance 2000 Total 944000 Total 944000 Accounts Payable 10000 Interest Payable 5000 Income tax Payable -4000 Net Cash Flow from Operating Expense 91000 Cash Flow from Investing Activities Sales of Equipment 27000 Purchase of Investments -174000 Cash Flow from Investing Activities -147000 Cash Flow from Financing Activities Issue of Bonds Payable 55000 Purchase of Common Stock 75000 Payments of Dividend -30000 Purchase of Tresury Stock -52000 Cash Flow from Financing Activities 48000 Net Increase(Decrease) in Cash -8000 Opening Cash Balance 31000 Closing Cash Balance 23000
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