Question

Statement of Cash Flows (Indirect Method) Dair Company's income statement and comparative balance sheets follow. DAIR COMPANY Income Statement For Year Ended December 31,2011 Sales $ 700,000 Cost of goods sold $ 440,000 Wages and other operating expenses 95,000 Depreciation expense 21,000 Amortization expense 6,000 Interest expense 10,000 Income tax expense 36,000 Loss on bond retirement 5,000 613,000 Net income $87,000 DAIR COMPANY Balance Sheets Dec. 31, 2011 Dec. 31, 2010 Assets Cash $ 22,000 $ 18,000 Accounts receivable 54,000 48,000 Inventory 103,000 109,000 Prepaid expenses 12,000 10,000 Plant assets 360,000 336,000 Accumulated depreciation (86,000) (84,000) Intangible assets 44,000 50,000 Total assets $ 509,000 $ 487,000 Liabilities and Stockholders' Equity Accounts payable $31,000 $ 26,000

Answer 1

1. Compute Change in Cash occurred in 2011

Compute Change in Cash occurred in 2011
Cash December 31, 2011	22,000.00
Cash December 31, 2010	18,000.00
Cash Increase during 2011	4,000.00

2. Prepare 2011 statement of cash flow using indirect method :

Dair Company
Statement of Cash Flows
For the year ended December 31, 2011
Net Cash flow from Operating Activities
Net Income		87,000.00
Add / Deduct item to convert Net Income to Cash Basis
Depreciation	21,000.00
Amortisatoin Expenses	6,000.00
Loss on Bond Retirement	5,000.00	32,000.00
Account receivable Increase	(6,000.00)
Inventory decrease	6,000.00
Prepaid expense Increase	(2,000.00)
Accouts payable Increase	5,000.00
Interest payable decrease	(4,000.00)
Income tax payable decrease	(2,000.00)	(3,000.00)
Net Cash provided by Operating activities		116,000.00
Cash Flow from Investing Activities
Sale of equipment	17,000.00
Purchase of Equipment	(60,000.00)	(43,000.00)
Cash flow from Financing activities
Retirement of Bonds Payable	(65,000.00)
Issurance of Common Stock	24,000.00
Payment of Dividends	(28,000.00)
Net cash used by financing activities		(69,000.00)
Net Increase in Cash		4,000.00
Cash beginning of the year		18,000.00
Cash at end of year		22,000.00

Q.3 Supplemental Cash Flow disclosure :

Supplemental Cash Flow disclosure
Cash Paid for interest (7000+10000-3000)	14,000.00
Cash paid for Income tax (8000+36000-6000)	38,000.00

Schedule for Non Cash Investing and Financing activities
Issuance of Bonds Payable to acquire Equipment	60,000.00

Please review response positively and provide your comment for any further clarification required.