The comparative balance sheets of Posner Company, for Years 1and 2 ended December 31, appear below in condensed form.
1
Year 2
Year 1
2
Cash
$53,000.00
$50,000.00
3
Accounts Receivable (net)
37,000.00
48,000.00
4
Inventories
108,500.00
100,000.00
5
Investments
70,000.00
6
Equipment
573,200.00
450,000.00
7
Accumulated Depreciation-Equipment
(142,000.00)
(176,000.00)
8
$629,700.00
$542,000.00
9
Accounts Payable
$62,500.00
$43,800.00
10
Bonds Payable, Due Year 2
100,000.00
11
Common Stock, $10 par
325,000.00
285,000.00
12
Paid-In Capital in Excess of ParâCommon Stock
80,000.00
55,000.00
13
Retained Earnings
162,200.00
58,200.00
14
$629,700.00
$542,000.00
The income statement for the current year is as follows:
1
Sales
$625,700.00
2
Cost of merchandise sold
340,000.00
3
Gross profit
$285,700.00
4
Operating expenses:
5
Depreciation expense
$26,000.00
6
Other operating expenses
68,000.00
94,000.00
7
Income from operations
$191,700.00
8
Other revenue and expense:
9
Gain on sale of investment
$4,000.00
10
Interest expense
(6,000.00)
(2,000.00)
11
Income before income tax
$189,700.00
12
Income tax
60,700.00
13
Net income
$129,000.00
Additional data for the current year are as follows:
(a) Fully depreciated equipment costing$60,000 was scrapped, no salvage, and new equipment was purchasedfor $183,200. (b) Bonds payable for $100,000 wereretired by payment at their face amount. (c) 5,000 shares of common stock wereissued at $13 for cash. (d) Cash dividends declared and paid,$25,000.
Required:
Prepare a statement of cash flows using the indirect methodof reporting cash flows from operating activities. Refer to theLabels and Amount Descriptions list provided for the exact wordingof the answer choices for text entries. Be sure to complete theheading of the statement. Use the minus sign to indicate cashoutflows, cash payments, decreases in cash, or any negativeadjustments.
Prepare a statement of cash flows using the indirect method ofreporting cash flows from operating activities. Refer to the Labelsand Amount Descriptions list provided for the exact wording of theanswer choices for text entries. Be sure to complete the heading ofthe statement. Use the minus sign to indicate cash outflows, cashpayments, decreases in cash, or any negative adjustments.
Posner Company
Statement of Cash Flows
1
Cash flows from operating activities:
2
3
Adjustments to reconcile net income to net cash flow fromoperating activities:
4
5
6
Changes in current operating assets and liabilities:
7
8
9
10
11
Cash flows from investing activities:
12
13
14
15
Cash flows from financing activities:
16
17
18
19
20
21
Cash at the beginning of the year
22
Cash at the end of the year
The comparative balance sheets of Posner Company, for Years 1and 2 ended December 31, appear below in condensed form.
1 | Year 2 | Year 1 | |
2 | Cash | $53,000.00 | $50,000.00 |
3 | Accounts Receivable (net) | 37,000.00 | 48,000.00 |
4 | Inventories | 108,500.00 | 100,000.00 |
5 | Investments | 70,000.00 | |
6 | Equipment | 573,200.00 | 450,000.00 |
7 | Accumulated Depreciation-Equipment | (142,000.00) | (176,000.00) |
8 | $629,700.00 | $542,000.00 | |
9 | Accounts Payable | $62,500.00 | $43,800.00 |
10 | Bonds Payable, Due Year 2 | 100,000.00 | |
11 | Common Stock, $10 par | 325,000.00 | 285,000.00 |
12 | Paid-In Capital in Excess of ParâCommon Stock | 80,000.00 | 55,000.00 |
13 | Retained Earnings | 162,200.00 | 58,200.00 |
14 | $629,700.00 | $542,000.00 |
The income statement for the current year is as follows:
1 | Sales | $625,700.00 | |
2 | Cost of merchandise sold | 340,000.00 | |
3 | Gross profit | $285,700.00 | |
4 | Operating expenses: | ||
5 | Depreciation expense | $26,000.00 | |
6 | Other operating expenses | 68,000.00 | 94,000.00 |
7 | Income from operations | $191,700.00 | |
8 | Other revenue and expense: | ||
9 | Gain on sale of investment | $4,000.00 | |
10 | Interest expense | (6,000.00) | (2,000.00) |
11 | Income before income tax | $189,700.00 | |
12 | Income tax | 60,700.00 | |
13 | Net income | $129,000.00 |
Additional data for the current year are as follows:
| (a) | Fully depreciated equipment costing$60,000 was scrapped, no salvage, and new equipment was purchasedfor $183,200. |
| (b) | Bonds payable for $100,000 wereretired by payment at their face amount. |
| (c) | 5,000 shares of common stock wereissued at $13 for cash. |
| (d) | Cash dividends declared and paid,$25,000. |
Required:
| Prepare a statement of cash flows using the indirect methodof reporting cash flows from operating activities. Refer to theLabels and Amount Descriptions list provided for the exact wordingof the answer choices for text entries. Be sure to complete theheading of the statement. Use the minus sign to indicate cashoutflows, cash payments, decreases in cash, or any negativeadjustments. Prepare a statement of cash flows using the indirect method ofreporting cash flows from operating activities. Refer to the Labelsand Amount Descriptions list provided for the exact wording of theanswer choices for text entries. Be sure to complete the heading ofthe statement. Use the minus sign to indicate cash outflows, cashpayments, decreases in cash, or any negative adjustments.
|
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The comparative balance sheets of Posner Company, for Years 1 and 2 ended December 31, appear below in condensed form.
| 1 | Year 2 | Year 1 | |
| 2 | Cash | $53,000.00 | $50,000.00 |
| 3 | Accounts Receivable (net) | 37,000.00 | 48,000.00 |
| 4 | Inventories | 108,500.00 | 100,000.00 |
| 5 | Investments | 70,000.00 | |
| 6 | Equipment | 573,200.00 | 450,000.00 |
| 7 | Accumulated Depreciation-Equipment | (142,000.00) | (176,000.00) |
| 8 | $629,700.00 | $542,000.00 | |
| 9 | Accounts Payable | $62,500.00 | $43,800.00 |
| 10 | Bonds Payable, Due Year 2 | 100,000.00 | |
| 11 | Common Stock, $10 par | 325,000.00 | 285,000.00 |
| 12 | Paid-In Capital in Excess of ParâCommon Stock | 80,000.00 | 55,000.00 |
| 13 | Retained Earnings | 162,200.00 | 58,200.00 |
| 14 | $629,700.00 | $542,000.00 |
The income statement for the current year is as follows:
| 1 | Sales | $625,700.00 | |
| 2 | Cost of merchandise sold | 340,000.00 | |
| 3 | Gross profit | $285,700.00 | |
| 4 | Operating expenses: | ||
| 5 | Depreciation expense | $26,000.00 | |
| 6 | Other operating expenses | 68,000.00 | 94,000.00 |
| 7 | Income from operations | $191,700.00 | |
| 8 | Other revenue and expense: | ||
| 9 | Gain on sale of investment | $4,000.00 | |
| 10 | Interest expense | (6,000.00) | (2,000.00) |
| 11 | Income before income tax | $189,700.00 | |
| 12 | Income tax | 60,700.00 | |
| 13 | Net income | $129,000.00 |
Additional data for the current year are as follows:
| (a) | Fully depreciated equipment costing $60,000 was scrapped, no salvage, and new equipment was purchased for $183,200. |
| (b) | Bonds payable for $100,000 were retired by payment at their face amount. |
| (c) | 5,000 shares of common stock were issued at $13 for cash. |
| (d) | Cash dividends declared and paid, $25,000. |
Required:
| Prepare a statement of cash flows using the indirect method of reporting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments. |
Labels and Amount Descriptions
| Labels | |
| For the Year Ended December 31, Year 2 | |
| Amount Descriptions | |
| Cash from sale of common stock | |
| Cash from sale of investments | |
| Cash paid for dividends | |
| Cash paid for purchase of equipment | |
| Cash paid to retire bonds payable | |
| Decrease in accounts payable | |
| Decrease in accounts receivable | |
| Decrease in cash | |
| Decrease in inventories | |
| Depreciation | |
| Gain on sale of investment | |
| Increase in accounts payable | |
| Increase in accounts receivable | |
| Increase in cash | |
| Increase in inventories | |
| Loss on sale of investment | |
| Net cash flow from financing activities | |
| Net cash flow from investing activities | |
| Net cash flow from operating activities | |
| Net cash flow used for financing activities | |
| Net cash flow used for investing activities | |
| Net cash flow used for operating activities | |
| Net income | |
| Net loss |
Statement of Cash Flows
Prepare a statement of cash flows using the indirect method of reporting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.
| Posner Company |
| Statement of Cash Flows |
| 1 | Cash flows from operating activities: | ||
| 2 | |||
| 3 | Adjustments to reconcile net income to net cash flow from operating activities: | ||
| 4 | |||
| 5 | |||
| 6 | Changes in current operating assets and liabilities: | ||
| 7 | |||
| 8 | |||
| 9 | |||
| 10 | |||
| 11 | Cash flows from investing activities: | ||
| 12 | |||
| 13 | |||
| 14 | |||
| 15 | Cash flows from financing activities: | ||
| 16 | |||
| 17 | |||
| 18 | |||
| 19 | |||
| 20 | |||
| 21 | Cash at the beginning of the year | ||
| 22 | Cash at the end of the year |
