LuluCo reported the following on its 2014 income statement. Using the income statement and the balance sheet given below, prepare the statement of cash flows using the indirect method. Ignore required disclosures for cash flows associated with interest paid and received, dividends paid and received and income taxes as well as any non-cash disclosures that may have occurred in the current year.
Analysis of accounts:
1) Retired bonds, paid $11,500
2) Sold HTM investment in Lala Consulting common shares for $11,500
3) Purchased equipment $57,000 cash
4) Sold furniture, and settled in cash.
5) Purchased HFT investments $3,000 cash. This companyâs HFT investments are not readily convertible to a known amount of cash but will be traded within 12 months.
6) Paid cash dividends
7) Issued common shares, 2,300 shares at $5 per share.
8) Changes in other balance sheet accounts resulted from usual transactions and events
LuluCo Income Statement For the year ended December 31, 2014 Sales $515,000 Operating expenses Cost of goods sold 257,500 Depreciation expense 10,000 Interest expense 4,725 Amortization expense 19,000 Other operating expenses 97,600 388,825 Other revenues and expenses Loss on sale of HTM investments -1,000 Net income $125,175 LuluCo Balance Sheet As of December 31, 2014 2014 2013 Cash $16,000 $31,500 Investments (held for trading 61,000 58,000 Accounts receivable, net 72,500 89,000 Inventory 69,500 82,000 HTM investments 43,000 55,500 Property, plant, equipment, net 117,000 120,000 Patent, net 34,000 53,000 Total assets $413,000 $489,000 Accounts payable $68,500 $78,000 Salaries payable 53,500 43,000 Short-term notes payable 122,000 139,500 Bonds payable 83,000 94,500 Common shares 39,000 27,500 Retained earnings 47,000 106,500 Total liabilities and shareholders' equity $413,000 $489,000
LuluCo reported the following on its 2014 income statement. Using the income statement and the balance sheet given below, prepare the statement of cash flows using the indirect method. Ignore required disclosures for cash flows associated with interest paid and received, dividends paid and received and income taxes as well as any non-cash disclosures that may have occurred in the current year.
Analysis of accounts:
1) Retired bonds, paid $11,500
2) Sold HTM investment in Lala Consulting common shares for $11,500
3) Purchased equipment $57,000 cash
4) Sold furniture, and settled in cash.
5) Purchased HFT investments $3,000 cash. This companyâs HFT investments are not readily convertible to a known amount of cash but will be traded within 12 months.
6) Paid cash dividends
7) Issued common shares, 2,300 shares at $5 per share.
8) Changes in other balance sheet accounts resulted from usual transactions and events
| LuluCo | |||
| Income Statement | |||
| For the year ended December 31, 2014 | |||
| Sales | $515,000 | ||
| Operating expenses | |||
| Cost of goods sold | 257,500 | ||
| Depreciation expense | 10,000 | ||
| Interest expense | 4,725 | ||
| Amortization expense | 19,000 | ||
| Other operating expenses | 97,600 | 388,825 | |
| Other revenues and expenses | |||
| Loss on sale of HTM investments | -1,000 | ||
| Net income | $125,175 | ||
| LuluCo | |||
| Balance Sheet | |||
| As of December 31, 2014 | 2014 | 2013 | |
| Cash | $16,000 | $31,500 | |
| Investments (held for trading | 61,000 | 58,000 | |
| Accounts receivable, net | 72,500 | 89,000 | |
| Inventory | 69,500 | 82,000 | |
| HTM investments | 43,000 | 55,500 | |
| Property, plant, equipment, net | 117,000 | 120,000 | |
| Patent, net | 34,000 | 53,000 | |
| Total assets | $413,000 | $489,000 | |
| Accounts payable | $68,500 | $78,000 | |
| Salaries payable | 53,500 | 43,000 | |
| Short-term notes payable | 122,000 | 139,500 | |
| Bonds payable | 83,000 | 94,500 | |
| Common shares | 39,000 | 27,500 | |
| Retained earnings | 47,000 | 106,500 | |
| Total liabilities and shareholders' equity | $413,000 | $489,000 | |
Related questions
Statement of Cash FlowsâIndirect Method
The comparative balance sheet of Amelia Enterprises, Inc. atDecember 31, 2014 and 2013, is as follows:
| Dec. 31, 2014 | Dec. 31, 2013 | ||||
| Assets | |||||
| Cash | $72,150 | $88,890 | |||
| Accounts receivable (net) | 110,870 | 119,830 | |||
| Merchandise inventory | 158,400 | 148,510 | |||
| Prepaid expenses | 6,450 | 4,500 | |||
| Equipment | 322,640 | 266,100 | |||
| Accumulated depreciation-equipment | (83,890) | (65,260) | |||
| Total | $586,620 | $562,570 | |||
| Liabilities and Stockholders'Equity | |||||
| Accounts payable (merchandise creditors) | $123,190 | $117,580 | |||
| Mortgage note payable | 0 | 168,770 | |||
| Common stock, $1 par | 19,000 | 12,000 | |||
| Paid-in capital in excess of par-common stock | 278,000 | 159,000 | |||
| Retained earnings | 166,430 | 105,220 | |||
| Total | $586,620 | $562,570 | |||
Additional data obtained from the income statement and from anexamination of the accounts in the ledger for 2014 are asfollows:
Net income, $156,700.
Depreciation reported on the income statement, $40,720.
Equipment was purchased at a cost of $78,630, and fullydepreciated equipment costing $22,090 was discarded, with nosalvage realized.
The mortgage note payable was not due until 2016, but the termspermitted earlier payment without penalty.
7,000 shares of common stock were issued at $18 for cash.
Cash dividends declared and paid, $95,490.
Required:
Prepare a statement of cash flows, using the indirect method ofpresenting cash flows from operating activities. Use the minus signto indicate cash out flows, cash payments, decreases in cash andfor any adjustments, if required.
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Attached are the income statement and statement of stockholdersâ equity for Varney Corp for the year ended 12/31/2014 and the comparative balance sheet information at 12/31/2013 and 12/31/2014. The following additional information is provided:
During 2014 Varney purchased land and a building through a $200,000 cash purchase. There were no disposals of operating assets during 2014. The building is the only depreciable operating asset that Varney owned during 2014
During 2014, Varney issued 5,000 shares of its own common stock for $50,000
During 2014, Varney repurchased 2,000 shares of its own common stock for $18,000
The other operating expenses were paid in full during 2014
During 2014, $2,000 of dividends were paid to stockholders
An equity statement is not shown because all relevant information to the statement of cash flows has been provided
Required:
Prepare a statement of cash flows for Varney Corp. for the year ended 12/31/2014 using the âindirectâ method of presenting operating cash flows.
| Varney Corp. | |||||
| Income Statement | |||||
| Year Ended 12/31/2014 | |||||
| Revenues and Gains: | |||||
| Sales Revenue | $1,118,000 | ||||
| Expenses and Losses: | |||||
| Cost of Goods Sold | $ 614.600 | ||||
| Salaries and Wages Expense | 206,800 | ||||
| Rent Expense | 9,000 | ||||
| Depreciation Expense | 4,000 | ||||
| Other Operating Expenses | 123,180 | ||||
| Interest Expense | 2,000 | 963,580 | |||
| Net Income | $ 158,420 | ||||
| Varney Corp. | |||||
| Comparative Balance Sheet Information | |||||
| 12/31/2013 & 12/31/2014 | |||||
| Assets: | 12/31/2013 | 12/31/2014 | Change | ||
| Cash | $ 85,800 | $136,900 | $ +51,100 | ||
| Accounts Receivable | 73,500 | 115,520 | +42,020 | ||
| Inventory | 40,000 | 15,400 | - 24,600 | ||
| Prepaid Rent | 3,000 | 0 | -3,000 | ||
| Operating Assets (Net) | 0 | 196,000 | +196,000 | ||
| Total Assets | $202,300 | $463,820 | $+261,520 | ||
| Liabilities and Stockholdersâ Equity: | |||||
| Accounts Payable | $ 51,500 | $120,000 | $ +68,500 | ||
| Salaries & Wages Payable | 900 | 6,000 | + 5,100 | ||
| Interest Payable | 500 | 0 | - 500 | ||
| Notes Payable | 50,000 | 50,000 | 0 | ||
| Paid-in Capital | 75,000 | 125,000 | +50,000 | ||
| Retained Earnings | 24,400 | 180,820 | +156,420 | ||
| Treasury Stock | 0 | (18,000) | -18,000 | ||
| Total Liabilities & Stockholdersâ Equity | $202,300 | $463,820 | $+261,520 | ||
Statement of Cash FlowsâIndirect Method
The comparative balance sheet of Amelia Enterprises, Inc. at December 31, 2014 and 2013, is as follows:
| Dec. 31, 2014 | Dec. 31, 2013 | ||||
| Assets | |||||
| Cash | $81,420 | $100,190 | |||
| Accounts receivable (net) | 125,110 | 135,070 | |||
| Merchandise inventory | 178,720 | 167,420 | |||
| Prepaid expenses | 7,280 | 5,070 | |||
| Equipment | 364,070 | 299,950 | |||
| Accumulated depreciation-equipment | (94,660) | (73,560) | |||
| Total | $661,940 | $634,140 | |||
| Liabilities and Stockholders' Equity | |||||
| Accounts payable (merchandise creditors) | $139,010 | $132,540 | |||
| Mortgage note payable | 0 | 190,240 | |||
| Common stock, $1 par | 21,000 | 13,000 | |||
| Paid-in capital in excess of par-common stock | 315,000 | 179,000 | |||
| Retained earnings | 186,930 | 119,360 | |||
| Total | $661,940 | $634,140 | |||
Additional data obtained from the income statement and from an examination of the accounts in the ledger for 2014 are as follows:
Net income, $172,980.
Depreciation reported on the income statement, $46,000.
Equipment was purchased at a cost of $89,020, and fully depreciated equipment costing $24,900 was discarded, with no salvage realized.
The mortgage note payable was not due until 2016, but the terms permitted earlier payment without penalty.
8,000 shares of common stock were issued at $18 for cash.
Cash dividends declared and paid, $105,410.
Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash and for any adjustments, if required.
