Prepare a comprehensive statement of cash flows - indirect
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INSTRUCTIONS:
Prepare a statement of cash flows for the year ended October 31, 2011, using the indirect method of reporting cash flows from operations.
The following schedule shows the account balances of Beneficio Corporation at the beginning and end of the fiscal year ended October 31, 2011.
Debits October 31, 2011 October 31, 2010
Cash and Cash Equivalents $222,000 $50,000
Investment Securities - Trading $10,000 $40,000
Accounts Receivable $148,000 $100,000
Inventories $291,000 $300,000
Prepaid Insurance $2,500 $2,000
Land and Building $195,000 $195,000
Equipment $305,000 $170,000
Discount on Bonds Payable $8,500 $9,000
Treasury Stock (at cost) $5,000 $10,000
Cost of Goods Sold $539,000
Selling and General Expenses $287,000
Income Taxes $35,000
Unrealized Loss on Trading Securities $4,000
Loss on Sale of Equipment $1,000
Total debits $2,053,000 $876,000
Credits October 31, 2011 October 31, 2010
Allowance for Bad Debts $8,000 $5,000
Accumulated Depreciation - Building $26,250 $22,500
Accumulated Depreciation - Equipment $39,750 $27,500
Accounts Payable $55,000 $60,000
Notes Payable - Current $70,000 $20,000
Miscellaneous Expenses Payable $18,000 $8,700
Taxes Payable $35,000 $10,000
Unearned Revenue $1,000 $9,000
Notes Payable - Long Term $40,000 $60,000
Bonds Payable - Long Term $250,000 $250,000
Deferred Income Tax Liability $47,000 $53,300
Common Stock $2, par $359,400 $200,000
Retained Earnings Appropriated for Possible Building Expansion $43,000 $33,000
Unappropriated Retained Earnings $34,600 $112,000
Paid-In Capital in Excess of Par Value $116,000 $5,000
Sales $898,000
Gain on Sale of Investment Securities $12,000
Total Credits $2,053,000 $876,000
The following information was also available:
a) All purchases and sales were on account
b) Equipment with an original cost of $15,000 was sold for $7,000
c) Selling and general expenses include the following:
Building Depreciation $3,750
Equipment depreciation $25,250
Bad Debt Expense $4,000
Interest Expense $18,000
d) A 6-month note payable for $50,000 was issued toward the purchase of new equipment.
e) The long term note payable requires the payment of $20,000 per year plus interest until paid.
f) Treasury stock was sold for $1,000 more than its cost.
g) During the year, a 30% stock dividend was declared and issued. At the time, there were 100,000 shares of $2 par common stock outstanding. However,
1,000 of these shares were held as treasury stock at the time and were prohibited from participating in the stock dividend. Market price was $10 per share
afte rthe stock dividend was issued.
h) Equipment was overhauled, extending its useful life at a cost of $6,000. The cost was debited to Accumulated Depreciation - Equipment.
i) Beneficio has determined that its purchases and sales of trading securities are operating activities.
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The expert prepares a comprehensive statement of cash flows for indirect.
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