Preparing a Statement of Cash Flows (Indirect Method)
BG Wholesalers is developing its annual financial statements at December 31, 2013. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized:
2013 | 2012 | |
Balance sheet at December 31 |
|
|
Cash | $37,000 | $29,000 |
Accounts recei vable | 32,000 | 28,000 |
Merchandise inventory | 41,000 | 38,000 |
Property and equipment | 132,000 | 111,000 |
Less: Accumulated depreciation | (41,000) | (36,000) |
$201,000 | $170,000 | |
Account- payable | $36,000 | $27,000 |
Accrued wage expense | 1,200 | 1,400 |
Note payable. long-term | 38,000 | 44,000 |
Contributed capital | 88,600 | 72,600 |
Retained earnings | 37,200 | 25,000 |
| $201,000 | $170,000 |
Income statement for 2013 |
|
|
Sales | $120,000 |
|
Cost of goods sold | 70,000 |
|
Other expenses | 37,800 |
|
Net income | $12,200 |
|
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.No dividends were declared or paid.
e.Other expenses included depreciation, $5,000; wages, $20,000; taxes, $6 ,000; other, $6,8 00.
f.Accounts payable includes only inventory purchases 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 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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