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Tovar Corporation: Cash Flow Statement

Please note that values are different here than on the attachment problem 14-4B.

Prepare the net cash provided by operating activities section of the company's statement of cash
flows for the year ended December 31, 2008, using the indirect method.

The three accounts shown below appear in the general ledger of Tovar Corp.during 2008.

Equipment
Date Debit Credit Balance
Jan. 1 Balance 160,000
July 31 Purchase of equipment 70,000 230,000
Sept. 2 Cost of equipment constructed 53,000 283,000
Nov. 10 Cost of equipment sold 49,000 234,000

Accumulated Depreciation?Equipment
Date Debit Credit Balance
Jan. 1 Balance 71,000
Nov. 10 Accumulated depreciation on
equipment sold 30,000 41,000
Dec. 31 Depreciation for year 28,000 69,000
Prepare partial statement of
cash flows?indirect method.

Retained Earnings
Date Debit Credit Balance
Jan. 1 Balance 105,000
Aug. 23 Dividends (cash) 14,000 91,000
Dec. 31 Net income 67,000 158,000

Instructions
From the postings in the accounts, indicate how the information is reported on a statement of cash flows using the indirect method.The loss on sale of equipment was $5,000. (Hint: Cost of equipment constructed is reported in the investing activities section as a decrease in cash of $53,000.)

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Solution Preview

E14-4B The three accounts shown below appear in the general ledger of Tovar Corp. during 2008.

Equipment
Date Debit Credit Balance
Jan. 1 Balance 160,000
July 31 Purchase of equipment 70,000 230,000
Sept. 2 Cost of equipment constructed 53,000 283,000
Nov. 10 Cost of equipment sold 49,000 234,000

Accumulated Depreciation?Equipment
Date Debit Credit Balance
Jan. 1 Balance 71,000 ...

Solution Summary

This solution is comprised of a detailed explanation to prepare the net cash provided by operating activities section of the company's statement of cash flows for the year ended December 31, 2008, using the indirect method.

$2.19