Preparing a Statement of Cash Flows (Indirect Method) (P13 -2 )
Audio House, Inc.. is developing its annual financial statements at December 31, 2013. The statements arc complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized as follows:
| 2013 | 2012 |
Balance sheet at December 31 | $64,000 | $65,000 |
Cash | 15,000 | 20,000 |
Accounts receivable | 22,000 | 20,000 |
Inventory | 210,000 | 150,000 |
Property and equipment | (60,000) | (45,000) |
Less: Accumulated depreciation | $251,000 | $210,000 |
| ||
Account Payable | $8,000 | $19,000 |
Taxes Payable | 2,000 | 1,000 |
Note Payable long-term | 86,000 | 75,000 |
Contributed Capital | 75,000 | 70,000 |
Retained earnings | 80,000 | 45,000 |
| $251,000 | $210,000 |
Income statement for 2013 | ||
Sales | $190,000 | |
Cost of goods sold | 90,000 | |
Other expenses | 60,000 | |
Net income | $40,000 |
Additional Data:
a.Bought equipment for cash, $60,000.
b.Borrowed an additional $11,000 on and signed an additional long-term note payable.
c. Issued new shares of stock for $5,000 cash.
d. Dividends of $5,000 were declared and paid in cash.
e.Other expenses included depreciation, $15,000; wages, $20,000; and taxes, $25,000.
f. Accounts payable includes only inventory purchases made on credit.
Required:
1. Prepare the statement of cash flows for the year ended December 31, 2013, using the indirect method.
2. Based on the cash flow statement, write a short paragraph explaining the major sources and uses of cash during 2013.
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