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P23-2, Hinckley Corporation - Statement of Cash Flows

The comparative balance sheets for Hinckley Corporation show the following information:
December 31
2010 2009
Cash $33,500 $13,000
Accounts receivable 12,250 10,000
Inventory 12,000 9,000
Investments 0 3,000
Building 0 29,750
Equipment 45,000 20,000
Patent 5,000 6,250
Totals $107,750 $91,000

Allowance for doubtful accounts $3,000 $4,500
Accumulated depreciation on equipment 2,000 4,500
Accumulated depreciation on building 0 6,000
Accounts payable 5,000 3,000
Dividends payable 0 5,000
Notes payable, short-term (nontrade) 3,000 4,000
Long-term notes payable 31,000 25,000
Common stock 43,000 33,000
Retained earnings 20,750 6,000
Totals $107,750 $91,000

Additional data related to 2010 are as follows:
1. Equipment that had cost $11,000 and was 40% depreciated at time of disposal was sold for $2,500.
2. $10,000 of the long-term note payable was paid by issuing common stock.
3. Cash dividends paid were $5,000.
4. On January 1, 2010, the building was completely destroyed by a flood. Insurance proceeds on the building were $30,000 (net of $2,000 taxes).
5. Investments (available-for-sale) were sold at $1,700 above their cost. The
company has made similar sales and investments in the past.
6. Cash of was paid for the acquisition of equipment.
7. A long-term note for $16,000 was issued for the acquisition of equipment.
8. Interest of $2,000 and income taxes of $6,500 were paid in cash.

Instructions:
Prepare a statement of cash flows using the indirect method. Flood damage is unusual and infrequent in that part of the country.

Attachments

Solution Summary

For your review, I have attached a fully formatted MS Excel spreadsheet containing a statement of cash flows created for P23-2 - the Hinckley Corporation Exercise in the creation of a Statement of Cash Flows using the Indirect Method.

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