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# Cash Flow Statement and Indirect Method

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Lori Crump owns a small trucking operation. The bookkeeper presented Crump with the following income statements and balance sheets for 2006 and 2005.
Income statements
2006 2005
Revenues \$191,400 \$182,600
Operating expenses
Depreciation \$26,400 \$26,400
Fuel \$77,000 \$46,200
Drivers salaries \$44,000 \$35,200
Tax and licenses \$22,000 \$17,600
Repairs \$30,800 \$19,800
Miscellaneous \$2,200 \$202,400 \$1,100 \$146,300
Income (loss) (\$11,000) \$36,300

Balance sheets
12/31/2006 12/31/2005
Cash \$22,000 \$4,400
Accounts receivables \$8,800 \$26,400
Net fixed assets \$198,000 \$224,400
Total assets \$228,800 \$255,200
Accounts payable \$30,800 \$22,000
Accrued salaries \$8,800 \$5,500
Other accruals \$3,300 \$1,100
Long term debt \$100,100 \$129,800
Crump, capital \$85,800 \$96,800
Total liabilities and capital \$228,800 \$255,200

Crump does not understand how the company can be \$17,600 ahead of last year in terms of cash on hand and yet show an \$11,000 loss for the year.

Required: Prepare a cash flow statement (indirect method) to use in explaining this to Lori Crump.

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This solution prepares a cash flow statement in Excel to explain why the company is \$17600 ahead of last year in terms of net cash on hand despite of Net loss during the year. All workings and formulas are shown.

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## Intermediate Financial Accounting Problem - Cash Flow Statement using indirect method.

The comparative balance sheets for Talbot Corporation show the following information:
December 31
2008 2007
Cash \$1,800 \$1,050
Accounts receivable 1,750 1,400
Inventory 1,600 1,800
Plant Assets 1,900 1,700
Accumulated depreciation (1,200) (1,150)
Long-term investments (Held-to-maturity) 1,300 1,320
Totals \$7,150 \$6,120

Accounts payable \$1,200 \$800
Accrued liabilities 200 270
Bonds payable 1,400 1,550
Common stock 1,900 1,700
Retained earnings 2,450 1,800
Totals \$7,150 \$6,120

Talbot Corporation
Income Statement
For the Year Ended December 31, 2008

Sales \$6,900
Cost of goods sold 4,600
Gross margin 2,300
Selling and administrative expense 930
Income from operations 1,370
Other revenues and gains
Gain on sale of investments 80
Income before tax 1,450
Income tax expense 540
Net income 910
Cash dividends 260
Income retained in business \$650

During the year, \$70 of common stock was issued in exchange for plant assets. No plant
assets were sold in 2008.

Instructions:
Prepare a statement of cash flows using the indirect method.

TALBOT CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2008
Cash flows from operating activities
Net income Amount
Adjustments to reconcile net income to net cash provided by operating activities:

Text Title Amount
Text Title Amount
Text Title Amount
Text Title Amount
Text Title Amount
Text Title Amount Formula
Net cash provided by operating activities Formula

Cash flows from investing activities
Text Title Amount
Text Title Amount
Net cash provided by investing activities Formula

Cash flows from financing activities
Text Title Amount
Text Title Amount
Text Title Amount
Net cash used by financing activities Formula

Increase in cash Amount
Cash, January 1, 2008 Amount
Cash, December 31, 2008 Formula

Noncash investing and financing activities
Text Title Amount

Instructions:
Prepare a statement of cash flows using the direct method.
(Do not prepare a reconciliation schedule).

TALBOT CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2008
Cash flows from operating activities
Text Title Amount
Text Title Amount
Text Title Amount
Text Title Amount Formula
Net cash provided by operating activities Formula

Cash flows from investing activities
Text Title Amount
Text Title Amount
Net cash provided by investing activities Formula

Cash flows from financing activities
Text Title Amount
Text Title Amount
Text Title Amount
Net cash used by financing activities Formula

Increase in cash Amount
Cash, January 1, 2008 Amount
Cash, December 31, 2008 Formula

Noncash investing and financing activities
Text Title Amount

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