Preparing a Statement of Cash Flows with Gain on Sale of Equipment ( Indirect Method) - XS Supply Company is developing its annual financial statements at December 31, 2011. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized:
|
2011
|
2010
|
|
Balance sheet at December 31
|
|
Cash
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$34,000
|
$29,000
|
|
Accounts receivable
|
35,000
|
28,000
|
|
Merchandise inventory
|
41,000
|
38,000
|
|
Property and equipment
|
121,000
|
100,000
|
|
Less: Accumulated depreciation
|
-30,000
|
-25,000
|
|
$201,000
|
$170,000
|
|
Accounts payable
|
$36,000
|
$27,000
|
|
Wages payable
|
1,200
|
1,400
|
|
Note payable, long-term
|
38,000
|
44,000
|
|
Contributed capital
|
88,600
|
72,600
|
|
Retained earnings
|
37,200
|
25,000
|
|
$201,000
|
$170,000
|
|
Income statement for 2011
|
|
Sales
|
$120,000
|
|
Gain on sale of equipment
|
1,000
|
|
Cost of goods sold
|
70,000
|
|
Other expenses
|
38,800
|
|
Net income
|
$12,200
|
Additional Data:
a. Bought equipment for cash, $31,000. Sold equipment with original cost of $10,000, accumulated depreciation of $7,000, for $4,000 cash .
b. Paid $6,000 on the long-term note payable.
c. Issued new shares of stock for $16,000 cash.
d. No dividends were declared or paid.
e. Other expenses included depreciation, $12,000; wages, $13,000; taxes, $6,000; and other, $7,800.
f. Accounts payable includes only inventory purchases made on credit. Because there are no liability accounts relating to taxes or other expenses, assume that these expenses were fully paid in cash.
Required:
1. Prepare the statement of cash flows for the year ended December 31, 2011, using the indirect method.
2. Evaluate the statement of cash flows.