Using financial statements to prepare a statement of cash flows— Indirect method
The comparative balance sheets and an income statement for Redwood Corporation follow.
Balance Sheets As of December 31 | ||
| 2012 | 2011 |
Assets |
|
|
Cash | $ 68,800 | $ 40,600 |
Accounts receivable | 30,000 | 22,000 |
Merchandise inventory | 160,000 | 176,000 |
Prepaid rent | 2,400 | 4,800 |
Equipment | 256,000 | 288,000 |
Accumulated depreciation | (146,800) | (236,000) |
Land | 192,000 | 80,000 |
Total assets | $562,400 | $375,400 |
Liabilities |
|
|
Accounts payable (inventory) | $ 67,000 | $ 76,000 |
Salaries payable | 28,000 | 24,000 |
Stockholders’ equity |
|
|
Common stock, $25 par value | 250,000 | 200,000 |
Retained earnings | 217,400 | 75,400 |
Total liabilities and stockholders' equity | $562,400 | $375,400 |
Income Statement For the Year Ended December 31, 2012 | |
Sales | $1,500,000 |
Cost of goods sold | (797,200) |
Gross profit | 702,800 |
Operating expenses |
|
Depreciation expense | (22,800) |
Rent expense | (24,000) |
Salaries expense | (256,000) |
Other operating expenses | (258,000) |
Net income | $ 142, 000 |
Other Information
1. Purchased land for $112,000.
2. Purchased new equipment for $100,000.
3. Sold old equipment that cost $132,000 with accumulated depreciation of $112,000 for $20,000 cash.
4. Issued common stock for $50,000.
Required
Prepare the statement of cash flows for 2012 using the indirect method.
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