Creating a statement of cash flows using indirect method


On the basis of the data for ABC Co. given below for 2008 and the previous year ended December 31, 2007, create a statement of cash flows using indirect method of reporting cash flows from operating activities. Suppose that equipment costing $125,000 was purchased for cash and equipment costing $85,000 with collected depreciation of $65,000 was sold for $15,000; the stock was issued for cash; and only entries in the retained earnings  account were net income of $51,000 and cash dividends declared of $13,000.

                                                                             Year 2008    Year 2007
Cash                                                                       $90,000      $ 78,000
Accounts receivable (net)                                          78,000         85,000
Inventories                                                             106,500         90,000
Equipment                                                              410,000       370,000
Accumulated depreciation                                     (150,000)     (158,000)
                                                                           $534,500      $465,000
Accounts payable (merchandise creditors)             $ 53,500       $ 55,000
Cash dividends payable                                              5,000            4,000
Common stock, $10 par                                        200,000       170,000
Paid-in capital in excess of par--   common stock      62,000         60,000
Retained earnings                                                   214,000       176,000
                                                                           $534,500     $465,000

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Accounting Basics: Creating a statement of cash flows using indirect method
Reference No:- TGS09758

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