Question

Year 1 The comparative balance sheets and income statements for Gypsy Company follow: Balance Sheets As of December 31 Year 2 Assets Cash $ 32,500 Accounts receivable 4,750 Inventory 11,200 Equipment 45,000 Accumulated depreciation equipment (17,800) Land 28,000 Total assets $103,650 Liabilities and equity Accounts payable (inventory) $ 3,750 Long-term debt 5,800 Common stock 47,000 Retained earnings 47,100 Total liabilities and equity $103,650 $ 16,300 2,800 9,800 52,000 (21,800) 12,000 $ 71,100 $ 4,900 7,800 25,000 33,400 $ 71,100 Income Statement For the Year Ended December 31, Year 2 Sales revenue $ 61,200 Cost of goods sold (24,500) Gross margin 36,700 Depreciation expense (12,000) Operating income 24,700 Gain on sale of equipment 1,500 Loss on disposal of land (100 Net income $ 26,100 Additional Data 1. During Year 2, the company sold equipment for $21,500; it had originally cost $36,000. Accumulated depreciation on this equipment was $16,000 at the time of the sale. 2. The company sold land that had cost $6,000. This land was sold for $5,900, resulting in the recognition of a $100 loss. 3. Also, common stock was issued in exchange for title to land that was valued at $22,000 at the time of exchange. Required Prepare a statement of cash flows using the indirect method (don't forget the supplementary noncash activities shown after the statement)

Answer 1

Answer:

Cash Flow statement
Cash Flow from Operating Activties
Net Income	$ 26,100
Gian on sale of equipment	$   (1,500)
Loss on sale of land	$        100
Depreciaton	$ 12,000
Increase in Account receivable	$   (1,950)
Increase in Inventory	$   (1,400)
Decrease in Accounts payable	$   (1,150)
		$ 32,200
Cash Flow from Investing Activties
Land sold	$    5,900
Equipment purchased	$(29,000)
Equipment sold	$ 21,500
		$   (1,600)
Cash Flow from Financing Activities
Dividends paid	$(12,400)
Debt paid	$   (2,000)
		$(14,400)
Total cash Flows		$ 16,200
Add: Opening Cash		$ 16,300
Closing Cash		$ 32,500

Non cash activities:

Exchange of land for stock is not included as it is non cash activity.

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