Statement of Cash Flows
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Balance sheet for Douder Company appears below:
Comparative Balance Sheet
Dec. 31, 2006 Dec. 31, 2005
Assets
Cash $53,000 $12,000
Accounts receivable 6,000 8,000
Inventory 11,000 7,000
Prepaid expenses 2,000 3,000
Equipment 20,000 20,000
Accumulated depreciation?equipment (3,000) (2,000)
Total assets $89,000 $48,000
Liabilities and Stockholders' Equity
Accounts payable $ 1,000 $ 4,000
Long-term note payable 13,000 14,000
Common stock 38,000 18,000
Retained earnings 37,000 12,000
Total liabilities and stockholders' equity $89,000 $48,000
The income statement for the year is as follows:
DOUDER COMPANY
Income Statement
For the Year Ended December 31, 2006
Sales (all on credit) $280,000
Expenses and losses
Cost of goods sold $192,000
Operating expenses, exclusive of depreciation 42,300
Depreciation expense 1,000
Interest expense 1,200
Loss on sale of land 2,500
Income taxes 9,000
Total expenses and loss 248,000
Net income $ 32,000
Cash dividends of $7,000 were paid during the year. Land costing $20,000 was acquired by the issuance of common stock. The property was subsequently sold for $17,500 cash.
Instructions
Prepare a statement of cash flows for the year ended December 31, 2006, 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
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