Preparing a statement of cash flows. (Adapted from CPA examination.) Exhibit 13.12 presents the comparative balance sheets
Question:
Preparing a statement of cash flows. (Adapted from CPA examination.) Exhibit 13.12 presents the comparative balance sheets for Plainview Corporation for Year 4 and Year 5.
The following additional information relates to Year 5 activities:
(1) The Retained Earnings account changed as follows:
(2) On January 2, Year 5, Plainview Corporation sold for \(\$ 127,000\) marketable securities with an acquisition cost and a book value of \(\$ 110,000\). The firm used the proceeds from this sale, the funds in the bond sinking fund, and the amount received from the issuance of the 8 -percent debentures to retire the 6 -percent mortgage bonds.
(3) The firm reissued treasury stock on February 28, Year 5. It treats "losses" on the reissue of treasury stock as a charge to Retained Earnings.
(4) The firm declared a stock dividend on October 31, Year 5, when the market price of Plainview Corporation's stock was \(\$ 12\) per share.
(5) On April 30, Year 5, a fire destroyed a warehouse that cost \(\$ 100,000\) and on which depreciation of \(\$ 65,000\) had accumulated. The loss was not insured. Plainview Corporation properly included the loss in the Continuing Operations section of the income statement.
(6) Plant and equipment transactions consisted of the sale of a building at its book value of \(\$ 4,000\) and the purchase of machinery for \(\$ 28,000\).
(7) The firm wrote off accounts receivable as uncollectible totaling \(\$ 16,300\) in Year 4 and \(\$ 18,500\) in Year 5. It recognized expired insurance of \(\$ 4,100\) in Year 4 and \(\$ 3,900\) in Year 5.
(8) The subsidiary, which is 40 percent owned, reported a loss of \(\$ 44,800\) for Year 5.
a. Prepare a T-account work sheet for Plainview Corporation for Year 5, defining funds as cash and cash equivalents.
b. Prepare a formal statement of cash flows for the year ending December 31, Year 5.
Step by Step Answer:
Financial Accounting An Introduction To Concepts Methods And Uses
ISBN: 9780324183511
10th Edition
Authors: Clyde P. Stickney, Roman L. Weil