Using financial statements to prepare a statement of cash flows— Indirect method
The comparative balance sheets and an income statement for Lind Beauty Products, Inc., shown on the next page.
Balance Sheets As of December31 | ||
| 2012 | , 2011 |
Assets |
|
|
Cash | $ 6,300 | $ 48,400 |
Accounts receivable | 10,200 | ‘ 7,260 |
Merchandise inventory | 45,200 | 56,000 |
Prepaid rent | 700 | 2,140 |
Equipment | 140,000 | 144,000 |
Accumulated depreciation | (73,400) | (118,000) |
Land | 116,000 | 50,000 |
Total assets | $245,000 | $189,800 |
Liabilities and equity |
|
|
Accounts payable (inventory) | $ 37,200 | $ 40,000 |
Salaries payable | 12,200 | 10,600 |
Stockholders’ equity |
|
|
Common stock, $50 par value | 150,000 | 120,000 |
Retained earnings | 45,600 | 19,200 |
Total liabilities and equity | $245,000 | $189,800 |
Income Statement For the year Ended December31,2012 | |
Sales | $480,000 |
Cost of goods sold | (264,000) |
Gross profit | 216,000 |
Operating expenses |
|
Depreciation expense | (11,400) |
Rent expense | (7,000) |
Salaries expense | (95,200) |
Other operating expenses | (76,000) |
Net income | $ 26,400 |
Other Information
1. Purchased land for $66,000.
2. Purchased new equipment for $62,000.
3. Sold old equipment that cost $66,000 with accumulated depreciation of $56,000 for $10,000 cash.
4. Issued common stock for $30,000.
Required
Prepare the statement of cash flows for 2012 using the indirect method.
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