Using financial statements to prepare a statements of cash flows— Indirect method
The comparative balance sheets and income statements for Pacific Company follow.
Balance Sheets As of December 31 | ||
| 2012 | 2011 |
Assets |
|
|
Cash | $24,200 | $ 2,800 |
Accounts receivable | 2,000 | 1,200 |
Inventory | 6,400 | 6,000 |
Equipment | 19,000 | 42,000 |
Accumulated depreciation—equipment | (9,000) | (17,400) |
Land | 18,400 | 10,400 |
Total assets | $61,000 | $45,000 |
Liabilities and equity |
|
|
Accounts payable (inventory) | $ 2,600 | $ 4,200 |
Long-term debt | 2,800 | 6,400 |
Common stock | 22,000 | 10,000 |
Retained earnings | 33,600 | 24,400 |
Total liabilities and equity | $61,000 | $45,000 |
Income Statement For the Year Ended December 31, 2012 |
| |
Sales revenue | $35,700 | |
Cost of goods sold | (14,1501 | |
Gross margin | 21,550 | |
Depreciation expense | (3,600) | |
Operating income | 17,950 | |
Gain on sale of equipment | 500 | |
Loss on disposal of land | (50) | |
Net income | $18,400 | |
Additional Data
1. During 2012, the company sold equipment for $18,500: it had originally cost $30,000. Accumulated depreciation on this equipment was $12,000 at the time of the sale. Also, the company purchased equipment for $7,000 cash.
2. The company sold land that had cost $4,000. This land was sold for $3,950, resulting in the recognition of a $50 loss. Also, common stock was issued in exchange for title to land that was valued at $12,000 at the time of exchange.
3. Paid dividends of $9,200.
Required
Prepare a statement of cash flows using the indirect method.
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