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    Statement of Cash Flow for Bannack Corp.

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    P12-12A
    Bannack Corp. is in the process of preparing its statement of cash flows for the year ended June 30,
    2010. An income statement for the year and comparative balance sheets are as follows:
    For the Year Ended June 30, 2010
    Sales revenue $400,000
    Cost of goods sold 240,000
    Gross profit $160,000
    General and administrative expenses $40,000
    Depreciation expense 80,000
    Loss on sale of plant assets 10,000
    Total expenses and losses $130,000
    Income before interest and taxes $30,000
    Interest expense 15,000
    Income before taxes $15,000
    Income tax expense 5,000
    Net income $10,000

    June 30
    2010 2009
    Cash $25,000 $40,000
    Accounts receivable 80,000 69,000
    Inventory 75,000 50,000
    Prepaid rent 2,000 18,000
    Total current assets $182,000 $177,000
    Land $60,000 $150,000
    Plant and equipment 575,000 500,000
    Accumulated depreciation (310,000) (250,000)
    Total long-term assets $325,000 $400,000
    Total assets $507,000 $577,000

    Accounts payable $145,000 $140,000
    Other accrued liabilities 50,000 45,000
    Income taxes payable 5,000 15,000
    Total current liabilities $200,000 $200,000
    Long-term bank loan payable $75,000 $150,000
    Common stock $100,000 $100,000
    Retained earnings 132,000 127,000
    Total stockholders' equity $232,000 $227,000
    Total liabilities and stockholders' equity $507,000 $577,000

    Dividends of $5,000 were declared and paid during the year. New plant assets were purchased during the year for
    $125,000 in cash. Also, land was sold for cash at its book value. Plant assets were sold during the year for
    $20,000 in cash. The original cost of the assets sold was $50,000, and their book value was $30,000.
    A portion of the bank loan was repaid.

    Required
    1. Prepare a statement of cash flows for 2010 using the indirect method in the Operating Activities
    section.
    BANNACK CORP.
    STATEMENT OF CASH FLOWS
    FOR THE YEAR ENDED JUNE 30, 2010

    Cash Flows from Operating Activities
    T F
    T
    T
    T F
    T F
    T F
    T F
    T F
    T F
    T F
    T F
    T F
    Cash Flow from Investing Activities
    T F
    T $
    T $
    T F
    Cash Flow from Financing Activities
    T F
    T $
    T F
    T F
    Cash balance, June 30, 2009 F
    Cash balance, June 30, 2010 F

    2. Evaluate the following statement: Whether a company uses the direct or indirect method to
    report cash flows from operations is irrelevant because the amount of cash flow from operating
    activities is the same regardless of which method is used.

    T
    T
    T
    T

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    Solution Summary

    The solution prepares cash flow statement with given data.

    $2.19