Problem

Preparing a Statement of Cash Flows (Indirect Method) (P13-1)Ingersol Construction Supply...

Preparing a Statement of Cash Flows (Indirect Method) (P13-1)

Ingersol Construction Supply Company is developing its annual financial statements at December 31, 2012. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized as follows:

 

2012

2011

Balance sheet at December 31

$34,000

$29,000

Cash

45,000

28,000

Accounts receivable

32,000

38,000

Merchandise inventory

121,000

100,000

Property and equipment

(30,000)

(25,000)

Less: Accumulated depreciation

$202,000

$170,000

Accounts payable

$36,000

$27,000

Wages payable

2,200

1,400

Note payable. long-term

40,000

16,000

Contributed capital

86,600

70,600

Retained earnings

37,200

25,000

 

$202,000

$170,000

Income statement for 2012

 

 

   Sales

$135,000

 

   Cost of goods sold

70,000

 

  Other expenses

37,800

 

Net income

$27,000

 

Additional Data:

a. Bought equipment for cash, $21,000.

b. Paid $6,000 on the long-term note payable.

c. Issued new shares of stock for $16,000 cash.

d. Dividends of $15,000 were declared and paid in cash.

e. Other expenses included depreciation. $5,000; wages. $20,000: taxes, $6,000; and other. 56,800.

f. Accounts payable includes only inventory purchase s made on credit. Because there are no liability accounts relating to taxes or other expenses, assume that these expenses were fully paid in cash.

Required:

1. Prepare the statement of cash flows using the indirect method for the year ended December 31, 2012 .

2. Evaluate the statement of cash flows.

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