Preparing a statement of cash flows over a two-year period using a T-account work sheet. Condensed financial statement data of Quebec Company for December 31, Year 1, Year 2, and Year 3, appear in Exhibits 4.31 and 4.32.

a. Prepare a statement of cash flows for Quebec Company for Year 2 using the indirect method of computing cash flow from operations. Support the statement with a T-account work sheet. The original cost of the property, plant, and equipment

sold during Year 2 was \(\$ 216,000\). The firm sold these assets for cash at their net book value.

b. Prepare a statement of cash flows for Year 3 using the indirect method of computing cash flow from operations. Support the statement with a T-account work sheet. The firm sold equipment during the year at a loss of \(\$ 4,000\). Expenditures on new property, plant, and equipment amounted to \(\$ 636,000\) during Year 3.

c. Comment on the pattern of cash flows from operating, investing, and financing activities for each year.

Transcribed Image Text:

QUEBEC COMPANY EXHIBIT 4.31 Debits Post-Closing Trial Balance Comparative Data (Problem 31) 12/31/Year 1 12/31/Year 2 12/31/Year 3 Cash Accounts Receivable Merchandise Inventories Total Current Assets Property, Plant, and Equipment Total Debits Credits Accounts Payable Accumulated Depreciation Bonds Payable Common Stock. Retained Earnings. Total Credits $ 110,000 220,000 250,000 $ 580,000 3,232,000 $3,812,000 $ 162,000 1,394,000 212,000 $ 174,000 240,000 230,000 $ 644,000 3,358,000 $4,002,000 $ 160,000 $ 194,000 210,000 280,000 $ 684,000 3,750,000 $4,434,000 $ 166,000 1,490,000 1,440,000 180,000 270,000 754,000 846,000 1,028,000 1,290,000 $3,812,000 1,376,000 1,480,000 $4,002,000 $4,434,000