Question

Indirect Method - Cash flow statement Sean Seymour Company Comparative balance sheet - December 31 Assets:                                   20x2          20x1 Cash                                     $26,000     $13,000 Accounts receivable                18,000       14,000 Inventories                              38,000       35,000 Property, Plant & Equip.          70,000       78,000 Accumulated depreciation     ( 30,000)    ( 24,000)                                              122,000     116,000 Liabilities & Stockholders’               Equity: Accounts payable                   29,000       33,000 Income taxes payable             15,000       20,000 Bonds payable                        20,000       10,000 Common stock                        25,000       25,000 Retained earnings                   33,000       28,000                                              122,000     116,000 Sean Seymour Co. Income statement for the year ended 12/31/x2 Sales                                                      $240,000 Less: COGS                               180,000 Selling                                  28,000 Admin expenses                   6,000 Income taxes                       7,000 Interest expense                   2,000           223,000 Net Income                                                 17,000   Dividends of $12,000 were declared and paid   During the year, equipment was sold for $10,000 cash.   This equipment     cost $15,000 originally & had accumulated depreciation of $5,000 at the time of      sale.   All depreciation expense, $11,000, is in the selling expense category   All sales and purchases are on account   Additional equipment was purchased for $7,000 cash Required: Prepare a statement of cash flows using the indirect method

	Balance		Reconciling Items 20xx			Balance	Check Balance
Debits	12/31/20xx		Debits		Credits	12/31/20xx	12/31/20xx
Cash									Sean Seymour
Accounts receivable									Cash Flow Statement
Inventory									12/31/20xx
Plant Assets
									Operating Activities:
Credits
Accumulated Depreciation
Accounts payable
Income taxes payable
Bonds payable
Capital stock
Retained earnings									Cash Provided by (Used in) Operating Activities
	-					-			Investing Activities:
Statement of Cash Flow Effects
Operating activities
									Cash Provided by (Used in) Investing Activities
									Financing Activities:
Investing activities									Cash Provided by (Used in) Financing Activities
									Net increase/(decrease) in cash
									Beginning Cash
Financing activities									Ending Cash
Change in cash
Totals			-		-

Answer 1

Sean Seymour Company Cashflow - Indirect Statement Debits Cash Accounts Receivable Inventory Plant Assets Balance Reconciling Items 20x2 Balance Check Balance Calculation 12/31/20x1 Debit Credit 12/31/20x2 12/31/20x2 Check Balance 13,000 13,000 26,000 26,000 Balance 12/31/20x1 + Debit - Credit 14,000 4,000 18,000 18,000 =14,000+4,000-0 35,000 3,000 38,000 38,000 =35,000+3,000-0 78,000 7,000 15,000 70,000 70,000 =78,000+7,000-15,000 140,000 152,000 152,000 11,000 Credits Accumulated Depreciation Accounts payable Income taxes payable Bonds payable Capital stock Retained earnings 5,000 4,000 5,000 24,000 33,000 20,000 10,000 25,000 28,000 140,000 30,000 29,000 15,000 20,000 25,000 33,000 152,000 10,000 30,000 29,000 15,000 20,000 25,000 33,000 152,000 Balance 12/31/20x1 + Credit - Debit =33,000-4,000 =20,000-5,000 =10,000+10,000 12,000 17,000 -28,000+17,000-12,000 17,000 Statement of Cash Flow Effects Operating activities Net income Increase in Accounts Receivable Increase in Inventory Depreciation expense Decrease in Accounts Payable Decrease in Income taxes payable 4,000 3,000 11,000 4,000 5,000 Investing Activities Payment to purchase plant assets Receipt from sale of plant assets 7,000 10,000 Financing Activities Payment of cash dividends Receipt from issue of bonds 12,000 10,000 Change in cash Totals 13,000 101,000 101,000

Sean Seymour Cash Flow Statement 12/31/20xx 17,000 11,000 Operating Activities: Net income Adjustments to reconcile net income to operating cash Depreciation expense Changes in operating assets and liabilities Increase in Accounts Receivable Increase in Inventory Decrease in Accounts Payable Decrease in Income taxes payable Total adjustments Cash Provided by (Used in) Operating Activities (4,000) (3,000) (4,000) (5,000) (5,000) 12,000 Investing Activities: Payment to purchase plant assets Receipt from sale of plant assets Cash Provided by (Used in) Investing Activities (7,000) 10,000 3,000 (12,000) 10,000 Financing Activities: Payment of cash dividends Receipt from issue of bonds Cash Provided by (Used in) Financing Activities Net increase/(decrease) in cash Beginning Cash Ending Cash (2,000) 13,000 13,000 26,000