Question

The following three accounts appear in the general ledger of Herrick Corp. during 2020.

Equipment
Date				Debit		Credit		Balance
Jan. 1		Balance						158,400
July 31		Purchase of equipment		70,200				228,600
Sept. 2		Cost of equipment constructed		54,800				283,400
Nov. 10		Cost of equipment sold				49,100		234,300
Accumulated Depreciation—Equipment
Date				Debit		Credit		Balance
Jan. 1		Balance						71,100
Nov. 10		Accumulated depreciation on equipment sold		28,700				42,400
Dec. 31		Depreciation for year				23,700		66,100
Retained Earnings
Date				Debit		Credit		Balance
Jan. 1		Balance						104,100
Aug. 23		Dividends (cash)		15,600				88,500
Dec. 31		Net income				65,400		153,900

From the postings in the accounts, indicate how the information is reported on a statement of cash flows using the indirect method. The loss on disposal of plant assets was $5,000. (Hint: Cost of equipment constructed is reported in the investing activities section as a decrease in cash of $54,800.)

Answer 1

Partial Statement of Cash Flows
For the Year Ended December 31, 2020
Cash Flows from Operating Activities
Net Income		65400
Adjustments to reconcile net income to
Net Cash Provided by Operating Activities
Depreciation Expense	23700
Loss on Disposal of Plant Assets	5000
		28700
Net Cash Provided by Operating Activities		94100
Cash Flows from Investing Activities
Sale of Plant Assets	15400		=49100-28700-5000
Construction of Equipment	-54800
Purchase of Equipment	-70200
Net Cash Used by Investing Activities		-109600
Cash Flows from Financing Activities
Payment of Cash Dividends		-15600