Share
Explore BrainMass

Pacific Company: Prepare a Statement of Cash Flows - Indirect method

THE FOLLOWING FINANCIAL STATEMENTS WERE DRAWN FROM THE RECORDS OF PACIFIC COMPANY.

BALANCE SHEETS - AS OF DECEMBER 31

2010 2009
ASSETS
CASH $24,200 $2,800
ACCOUNTS RECEIVABLE 2,000 1,200
INVENTORY 6,400 6,000
EQUIPMENT 19,000 42,000
ACC. DEP - EQUIPMENT (9,000) (17,000)
LAND 18,400 10,400
TOTAL ASSETS $61,000 $45,000

LIABILITIES AND EQUITY
ACCOUNTS PAYABLE (INVENTORY) $2,600 $4,200
LONG-TERM DEBT 2,800 6,400
COMMON STOCK 22,000 10,000
RETAINED EARNINGS 33,600 24,400
TOTAL LIABILITIES AND EQUITY $61,000 $45,000

INCOME STATEMENT - FOR THE YR ENDED DEC. 31, 2010

SALES REVENUE $35,700
COST OF GOODS SOLD (14,150)
GROOS MARGIN 21,550
DEPRECIATION EXPENSE (3,600)
OPERATING INCOME 17,950
GAIN ON SALE OF EQUIP 500
LOSS ON DISPOSAL OF LAND (50)
NET INCOME $18,400

ADDITIONAL DATA

1. DURING 2010, THE COMPANY SOLD EQUIPMENT FOR $18,500; IT HAD ORIGINALLY COST $30,000. ACCUMULATED DEPRECIATION ON THIS EQUIPMENT WAS $12,000 AT THE TIME OF THE SALE. ALSO, THE COMPANY PURCHASED EQUIPMENT FOR $7,000 CASH.

2. THE COMPANY SOLD LAND THAT HAD COST $4,000. THIS LAND WAS SOLD FOR $3,950, RESULTING IN THE RECOGNITION OF A $50 LOSS. ALSO, COMMON STOCK WAS ISSUED IN EXCHANGE FOR TITLE TO LAND THAT WAS VALUED AT $12,000 AT THE TIME OF EXCHANGE.

3. PAID DIVIDENDS OF $9,200.

PREPARE A STATEMENT OF CASH FLOWS USING THE INDIRECT METHOD.

Solution Preview

See attached file.

The solution is provided in a separate excel file attached. All results and ending cash balance are reconcilied by preparing working ...

Solution Summary

The expert prepares a statement of cash flows using the indirect method for Pacific Company.

$2.19