Problem: 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.