ACCTG414 Chapter Notes - Chapter 5: Retained Earnings, Ostrich, Cash Flow Statement
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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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| a. Using theinformation for the Seville Corporation above, calculation the cashflow from operating activities. | |
| b. Using the information forthe Seville Corporation above, calculation the cash flow frominvesting activities. | |
| c. Using the information for the SevilleCorporation above, calculation the cash flow from financingactivities. | |
| Accounts payable increase | 9,000 |
| Accounts receivable increase | 4,000 |
| Accrued liabilities decrease | 3,000 |
| Amortization expenses | 6,000 |
| Cash balance Jan 1 | 22,000 |
| Cash balance Dec 31 | 1,500 |
| Cash paid as dividends | 2,900 |
| Cash paid to purchase land | 90,000 |
| Cash paid to retire bonds payable atpar | 60,000 |
| Cash received from issurance of commonstock | 35,000 |
| Cash received from sale equipment | 17,000 |
| Depreciation expenes | 29,000 |
| Gain on sale of equipment inventorydecreases | 4,000 |
| Inventory decrease | 13,000 |
| Net Income | 76,000 |
| Prepaid expenses increase | 2,000 |
Preppare the Cash Flows from Operating Activites section of thestatement of cash flows, using the indirect method.
The income statement disclosed the following items for 2016:
| Depreciation expense | $24,000 |
| Gain on disposal of equipment | $16,000 |
| Net income | $38,000 |
Changes in current assets and current liabilities betweenDecember 31, 2015 and December 31, 2016, are as follows:
| Increase in accounts receivable | $20,000 |
| Decrease in inventory | 14,000 |
| Increase in prepaid insurance | 2,000 |
| Decrease in accounts payable | 5,000 |
| Decrease in interest payable | 1,000 |
| Increase in incomes taxes payable | 10,000 |
Statement of Cash Flows
| Cash from Operating Activites | |
