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Keating Corporation: Statement of cash flows, indirect

Statement of cash flows (indirect method).The net changes in the balance sheet accounts of Keating Corporation for the year 2011 are shown below.

Account Debit
Cash $ 82,000
Short-term investments $121,000 Cr

Accounts receivable 83,200 Dr
Allowance for doubtful accounts 13,300 Cr

Inventory 74,200Dr
Prepaid expenses 22,800Cr
Investment in subsidiary (equity method) 25,000Cr

Plant and equipment 210,000dr
Accumulated depreciation 130,000 Cr

Accounts payable 80,700dr
Accrued liabilities 21,500Cr

Deferred tax liability 15,500dr
8% serial bonds 70,000Cr
Common stock, $10 par 90,000Cr
Additional paid-in capital 150,000Cr

Retained earnings Appropriation for bonded indebtedness 60,000Dr
Retained earnings Unappropriated 38,000 Dr
$643,600 Total debits $643,600 total credits

An analysis of the Retained EarningsUnappropriated account follows:

Retained earnings unappropriated, December 31, 2010 $1,300,000
Add: Net income 327,000
Transfer from appropriation for bonded indebtedness 60,000
Total $1,687,000
Deduct: Cash dividends $185,000
Stock dividend 240,000
425,000

Retained earnings unappropriated, December 31, 2011 $1,262,000

1. On January 2, 2011 short-term investments (classified as available-for-sale) costing $121,000 were sold for $155,000.

2. The company paid a cash dividend on February 1, 2011.

3. Accounts receivable of $16,200 and $19,400 were considered uncollectible and written off in 2011 and 2010, respectively.

4. Major repairs of $33,000 to the equipment were debited to the Accumulated Depreciation account during the year. No assets were retired during 2011.

5. The wholly owned subsidiary reported a net loss for the year of $20,000. The loss was recorded by the parent.

6. At January 1, 2011, the cash balance was $166,000.

Instructions
Prepare a statement of cash flows (indirect method) for the year ended December 31, 2011. Keating Corporation has no securities which are classified as cash equivalents

Solution Summary

Your tutorial is attached in Excel. Click in cells to see computation. In each cell the amounts "point" to the data that constructs it. This is not for novices that have no experience with cash flow statements as it takes some background to know "why" each cell is pointing at the particular changes in the balance sheet.

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