Prepare and analyze a statement of cash flows
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The following comparative balance sheets and income statement are available for Little Bit Inc. Prepare a statement of cash flows for 2009 using the indirect method and analyze the statement.
December 31,
2009 2008
Cash $ 40,000 $ 24,000
Accounts receivable (net) 48,000 41,500
Inventory 43,000 34,500
Prepaid expenses 19,000 15,000
Total Current Assets $ 150,000 $ 115,000
Plant and equipment $ 67,000 $ 61,000
Less accumulated depreciation (41,000) (23,000)
Plant and equipment (net) $ 26,000 $ 38,000
Long-term investments 90,000 89,000
Total Assets $ 266,000 $ 242,000
Accounts payable $ 13,000 $ 11,000
Accrued liabilities 55,000 71,000
Total Current Liabilities $ 68,000 $ 82,000
Long-term debt 25,000 8,000
Deferred taxes 4,000 3,500
Total Liabilities $ 97,000 $ 93,500
Common stock ($1 par) and additional paid-in capital 112,000 97,000
Retained earnings 57,000 51,500
Total Liabilities and Equity $ 266,000 $ 242,000
Income Statement for 2009
Sales $155,000
Cost of goods sold 83,000
Gross profit $ 72,000
Selling and administrative $45,700
Depreciation 18,000 63,700
Operating Profit $ 8,300
Interest expense 2,000
Earnings before tax $ 6,300
Tax expense 800
Net income $5,500
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Solution Summary
The solution explains how to prepare a statement of cash flows using indirect method and its analysis.
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