Problem

Using financial statements to prepare a statement of cash flows— Indirect methodThe follow...

Using financial statements to prepare a statement of cash flows— Indirect method

The following financial statements were drawn from the records of Healthy Products Co.

Balance Sheets As of December 31

 

2012

2011

Assets

 

 

Cash

$16,120

$ 1,940

Accounts receivable

2,400

2,000

Inventory

2,000

2,600

Equipment

13,700

17,100

Accumulated depreciation—equipment

(11,300)

(12,950)

Land

13,000

8,000

Total assets

$35,920

$18,690

Liabilities and stockholders’ equity

 

 

Accounts payable (inventory)

$3,600

$ 2,400

Long-term debt

3,200

4,000

Common stock

17,000

10,000

Retained earnings

12,120

2,290

Total liabilities and stockholders’ equity

$35,920

$18,690

Income Statement

For the Ended December31,2012

Sales revenue

$17,480

Cost of goods sold

(6,200)

Gross margin

11,280

Depreciation expense

(1,750)

Operating income

9,530

Gain on sale of equipment

1,800

Loss on disposal of land

(600)

Net income

$10,730

Additional Data

1. During 2012, the company sold equipment for $6,800; it had originally cost $8,400. Accumulated depreciation on this equipment was $3,400 at the time of the sale. Also, the company purchased equipment for $5,000 cash.


2. The company sold land that had cost $2,000. This land was sold for $1,400, resulting in the recognition of a $600 loss. Also, common stock was issued in exchange for title to land that was valued at $7,000 at the time of exchange.


3. Paid dividends of $900.

Required

Prepare a statement of cash flows using the indirect method.

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