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Logan Company: Statement of cash flows

The comparative balance sheets for Logan Company appear below:

LOGAN COMPANY
Comparative Balance Sheet
Dec. 31, 2003 Dec. 31, 2002
Assets
Cash $61,000 $12,000
Accounts receivable 5,000 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 $96,000 $48,000

Liabilities and Stockholders' Equity

Accounts payable $ 2,000 $ 4,000
Long-term note payable 13,000 14,000
Common stock 38,000 18,000
Retained earnings 43,000 12,000
Total liabilities and stockholders' equity $96,000 $48,000
The income statement for the year is as follows:

LOGAN COMPANY
Income Statement
For the Year Ended December 31, 2003
Sales (all on credit) $310,000
Expenses and losses
Cost of goods sold $202,000
Operating expenses, exclusive of depreciation 44,300
Depreciation expense 1,000
Interest expense 1,200
Loss on sale of land 2,500
Income taxes 9,000
Total expenses and loss 260,000
Net income $ 50,000

Cash dividends of $19,000 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, 2003 using the indirect method.

Solution Preview

Logan Company's Balance Sheet Ending Beginning Increase Activity
Balance Balance (Decrease)
Cash 61,000 12,000 49,000
Accounts receivable 5,000 8,000 (3,000) Operating
Inventory 11,000 7,000 4,000 Operating
Prepaid expenses 2,000 3,000 (1,000) Operating
Equipment 20,000 20,000 - Investing
Accumulated depreciation (3,000) (2,000) (1,000) Operating
Total assets 96,000 48,000

Accounts payable 2,000 4,000 -2,000 Operating
Long-term note payable 13,000 14,000 -1,000 Financing
Common stock 38,000 18,000 20,000 Financing
Retained earnings 43,000 12,000
Total liabilities and owners' equity 96,000 48,000

Logan Company's Income Statement
Sales $310,000
Less cost of goods sold 202,000
Operating expenses 44,300
Depreciation expense 1,000
Interest expense 1,200
Loss on sale of land 2,500
Income taxes 9,000 ...

Solution Summary

This solution is comprised of a detailed explanation to prepare a statement of cash flows for the year ended December 31, 2003 using the indirect method.

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