Purchase Solution

Statement of Cash Flow - Indirect Method

Not what you're looking for?

Ask Custom Question

The comparative balance sheet of Posner Company, for 2011 and the preceeding year ended December 31, 2010 are:
2011 2010
Cash $53,000 50,000
Accts Rec 37,000 48,000
Inventories 108,500 100,000
Investments ........... 70,000
Equipment 573,200 450,000
Acc Depreciation (142,000) (176,000)

Accounts Payable $62,500 $43,800
Bonds Payable, due 2011 ........ 100,000
Common Stock, $10 par 325,000 285,000
Paid-in Capital in excess of par
common stock 80,000 55,000
Retained earnings 162,200 58,200
$629,700 $542,000

The income statement for the current year is as follows:
Sales $625,700
Cost of Merchandise sold 340,000
Gross Profit $285,700
Operating expenses:
Depreciation expense $26,000
Other operating expense 68,000
Income from operations 94,000
Other income:
Gain on sale of investment $4,000
Other expense:
Interest expense 6,000 (2,000)
Income before income tax $189,700
Income tax 60,700
Net income $129,000

Additional data for the current year are as follows:
(a) Fully depreciated equipment costing $60,000 was scraped, no salvage, and equipment was purchased for $183,200
(b) Bonds payable for $100,000 were retired by payment at their face amount.
(c) 5,000 shares of common stock were issued at $13 for cash.
(d) Cash dividends declared and paid, $25,000.

Posner Company
Statement of Cash Flows - Indirect Method
For the Year Ended December 31, 2011

Cash flows from Operating Activities
Net Income $129,000
Adjustments to reconcile net income to net
cash flow from operating activities:
Depreciation $26,000 ?
Gain on Sale of Investments (4,000) ?
Changes in current operating assets and liabilities:
Decrease in Accounts Receivable 11,000
Increase in Inventory (8,500)
Increase in Accounts Payable 18,700
Net cash Flow from Operating Activities 172,200
Cash Flows from Investing Activities
Investments (66,000) ?
Equipment Purchase (243,200) ?
Net Cash Flow for Investing Activities (309,200)
Cash Flows from Financing Activities
Bonds Payable 100,000
Common Stock Issuance 65,000
Dividends Paid (25,000)
Net cash Flow used for Financing Activities 140,000
Increase in Cash 3,000
Cash at the beginning of the year 50,000
Cash at the end of the year 53,000

Purchase this Solution

Solution Summary

The statement of cash flows for indirect methods are examined.

Solution Preview

Dear student,
Solution is provided in a separate excel file attached ...

Purchase this Solution

Free BrainMass Quizzes
Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.


This tests some key elements of major motivation theories.

Six Sigma for Process Improvement

A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.

Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

Learning Lean

This quiz will help you understand the basic concepts of Lean.