Question

prepare cash flow statement

PROBLEM 2-14 STATEMENT OF CASH FLOWS ancial statements for the Pe The financia its for the Peoples Show Store are as follows: INCOME STATEMENT 2013 Sales Cost of Goods Sold Gross Profit 800,000 500.000 300,000 Selling and Operating Expenses Net Operating Income Nonoperating items: 213,000 87.000 Gain on sale of investing Loss on sale of equipment 7,000 _(4.000) DO Income before taxes Income taxes Net Income - 3.000 90,000 27,000 63,000 ODP 00002 During 2013, Peoples sold some equipment for $20,000 that had cost $40,000 and hich there was accumulated depreciation of $16,000. In addition, the company sold term investments for $10,000 that had cost $3,000 when purchased several years A cash dividend was paid during 2013 and the company repurchased $40,000 of its own stock. Peoples did not retire any bonds during 2013.

Answer 1

Solution

Peoples Show Store

Statement of Cash flows (indirect method)

Peoples Company
Statement of Cash Flows
For the Year Ended 2013
Cash flow from operating activities:
Net Income		$63,000
Adjustments to reconcile net income to net cash flow from operations:
Gain on sale of investment	($7,000)
Loss on sale of equipment	$4,000
Depreciation	$24,000
Increase in accounts receivable	($100,000)
Decrease in inventory	$50,000
Increase in prepaid expenses	($4,000)
Increase in accounts payable	$80,000
Decrease in accrued liabilities	($12,000)
Increase in income taxes payable	$6,000	$41,000
Cash flow from operating activities:		$104,000
Cash flow from investing activities:
Purchase of PP&E	($180,000)
Sale of Equipment	$20,000
Sale of investments	$10,000
Cash flow from investing activities:		($150,000)
Cash flow from financing activities:
Stock repurchase	($40,000)
dividends paid	($30,000)
Issue of bonds payable	$110,000
Cash flow from financing activities:		$40,000
Decrease in cash		($6,000)
Beginning cash balance		$15,000
Ending cash balance		$9,000

Computations:

1. Equipment purchased during the year –

PP&E beg. Balance    $470,000

Less: equipment sold 40,000

Less: ending balance 610,000

Cost of Equipment purchased = 470,000 – 40,000 – 610,000 = $180,000

2. Current year depreciation –

Beg. Accumulated depreciation = $85,000

Less: accumulated depreciation on equipment sold = 16,000

Less: ending balance = 93,000

Current year depreciation = 85,000 – 16,000 – 93,000 = $24,000

3. Dividends paid –

Retained earnings beg. Balance = 74,000

Add: net income = 63,000

Total = 137,000

Less: ending balance = 107,000

Dividends paid = $30,000