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Statement of Cash Flows

** see Excel attachment **

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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 sheet as of December 31

Assets 2010 2009
Cash $68,800 40,600
Accounts rec 30,000 22,000
Merch invent 160,000 176,000
Preaid rent 2,400 4,800
Equipment 256,000 288,000
Accum depr (146,800) (236,000)
Land 192,000 80,000
Total assets 562,400 375,400

Liabilities
Accts pay inven $67,000 $76,000
Salaries pay 28,000 24,000

Stockholders eq
Common stock $25
Par value 250,000 200,000
Retained earnings 217,400 75,400
Tot liabilities are
Stockholder eq 562,400 375,400

Income statement for the year ended December 31, 2010

Sales $1500,000
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 Inventory

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

Prepare the statement of cash flows for 2010 using the indirect method.

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Solution Summary

The solution explains how to prepare a statement of cash flows using the indirect method for Redwood Corporation

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