Statement of Cash Flows (Indirect Method) Dair Company’s income…
Question Answered step-by-step Statement of Cash Flows (Indirect Method) Dair Company’s income… Statement of Cash Flows (Indirect Method)Dair Company’s income statement and comparative balance sheets follow.DAIR COMPANYIncome StatementFor Year Ended December 31,2011 Sales $ 700,000Cost of goods sold$ 440,000 Wages and other operating expenses95,000 Depreciation expense22,000 Amortization expense2,000 Interest expense7,000 Income tax expense36,000 Loss on bond retirement3,000605,000Net income $95,000 DAIR COMPANYBalance Sheets Dec. 31, 2011Dec. 31, 2010Assets Cash$ 50,000$ 22,000Accounts receivable53,00050,000Inventory103,000111,000Prepaid expenses12,0009,000Plant assets358,000329,000Accumulated depreciation(87,000)(84,000)Intangible assets48,00050,000Total assets$ 537,000$ 487,000Liabilities and Stockholders’ Equity Accounts payable$ 35,000$ 26,000Interest payable2,0007,000Income tax payable7,0008,000Bonds payable65,000118,000Common stock257,000228,000Retained earnings171,000100,000Total liabilities and equity$ 537,000$ 487,000During 2011, the company sold for $17,000 cash old equipment that had cost $36,000 and had $19,000 accumulated depreciation. Also in 2011, new equipment worth $65,000 was acquired in exchange for $65,000 of bonds payable, and bonds payable of $118,000 were retired for cash at a loss. A $24,000 cash dividend was declared and paid in 2011. Any stock issuances were for cash.(a) Compute the change in cash that occurred in 2011.Cash, December 31, 2011AnswerCash, December 31, 2010AnswerCash increase during 2011Answer(b) 2011 statement of cash flows using the indirect method.Use negative signs with answers to show a decrease in cash. DAIR COMPANYSTATEMENT OF CASH FLOWSFOR YEAR ENDED DECEMBER 31, 2011 Net Cash Flow from Operating Activities Net IncomeAnswer Add (Deduct) Items to Convert Net Income to Cash Basis DepreciationAnswer Amortization expenseAnswer Loss on Bond RetirementAnswer Accounts Receivable IncreaseAnswer Inventory DecreaseAnswer Prepaid Expenses IncreaseAnswer Accounts Payable IncreaseAnswer Interest Payable DecreaseAnswer Income Tax Payable DecreaseAnswer Net Cash Provided by Operating Activities AnswerCash Flows from Investing Activities Sale of Equipment AnswerCash Flows from Financing Activities Retirement of Bonds PayableAnswer Issuance of Common StockAnswer Payment of DividendsAnswer Net Cash Used by Financing Activities AnswerNet Increase in Cash AnswerCash at Beginning of Year AnswerCash at End of Year Answer(c) Prepare separate schedules showing (1) cash paid for interest and for income taxes and (2) noncash investing and financing transactions.(1) Supplemental Cash Flow Disclosures Cash Paid for InterestAnswerCash Paid for Income TaxesAnswer (2) Schedule of Noncash Investing and Financing Activities Issuance of Bonds Payable to Acquire EquipmentAnswer Accounting Business Financial Accounting MGMT MISC Share QuestionEmailCopy link Comments (0)
