Ramirez Company: Prepare a Statement of Cash Flows, Indirect method for 2007
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The comparative balance sheets for Ramirez Company as of December 31 are
presented below.
RAMIREZ COMPANY
Comparative Balance Sheets
December 31
Assets 2007 2006
Cash $ 71,000 $ 45,000
Accounts receivable 44,000 62,000
Inventory 151,450 142,000
Prepaid expenses 15,280 21,000
Land 105,000 130,000
Equipment 228,000 155,000
Accumulated depreciation-equipment (45,000) (35,000)
Building 200,000 200,000
Accumulated depreciation-building (60,000) (40,000)
Total $ 709,730 $680,000
Liabilities and Stockholders' Equity
Accounts payable $ 47,730 $ 40,000
Bonds payable 260,000 300,000
Common stock, $1 par 200,000 160,000
Retained earnings 202,000 180,000
Total $ 709,730 $680,000
Additional information:
1. Operating expenses include depreciation expense of $42,000 and charges from prepaid
expenses of $5,720.
2. Land was sold for cash at book value.
3. Cash dividends of $15,000 were paid.
4. Net income for 2007 was $37,000.
5. Equipment was purchased for $95,000 cash. In addition, equipment costing $22,000
with a book value of $10,000 was sold for $6,000 cash.
6. Bonds were converted at face value by issuing 40,000 shares of $1 par value common
stock.
Instructions
Prepare a statement of cash flows for the year ended December 31, 2007, using the indirect method.
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Solution Summary
The solution presents the Statement of Cash Flows for Ramirez Company together with explanations and notes for better understanding.
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