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Statement of Cash Flows using the indirect method

A comparative balance sheet for Tiger Company appears below:

TIGER COMPANY
Comparative Balance Sheet
12/31/2008 12/31/2007
Assets
Cash $23,000 $10,000
Accounts receivable 18,000 14,000
Inventory 27,000 18,000
Prepaid expenses 6,000 9,000
Long-term investments -0- 18,000
Equipment 60,000 32,000
Accumulated depreciation - equipment (18,000) (14,000)
Total assets $116,000 $87,000
Liabilities and Stockholders' Equity
Accounts payable $17,000 $7,000
Bonds payable 37,000 47,000
Common stock 40,000 23,000
Retained earnings 22,000 10,000
Total liabilities and stockholders' equity $116,000 $87,000

Additional information:

1. Net income for the year ending December 31, 2008 was $24,000.
2. Cash dividends of $12,000 were declared and paid during the year.
3. Long-term investments that had a cost of $18,000 were sold for $16,000.
4. Sales for 2008 were $120,000.

Instructions: Prepare a statement of cash flows for the year ended December 31, 2008, using the indirect method.

Solution Preview

Please see the attached Excel 97-2003 spreadsheet for proper format and formulas.

A comparative balance sheet for Tiger Company appears below:
TIGER COMPANY
Comparative Balance Sheet
12/31/2008 12/31/2007 Change
Assets
Cash $23,000 $10,000 $13,000
Accounts receivable 18,000 14,000 $4,000
Inventory 27,000 18,000 $9,000
Prepaid expenses 6,000 9,000 $(3,000)
Long-term investments - 18,000 $(18,000)
Equipment 60,000 32,000 $28,000
Accumulated depreciationâ?"equipment    (18,000) (14,000) $(4,000)
Total assets $116,000 $87,000 ...

Solution Summary

This solution illustrates how to prepare a Statement of Cash Flows using the indirect method.

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