(L02,4) (SCF—Indirect Method) You have completed the field work in connection with your audit of Alexander Corporation for the year ended December 31, 2017. The balance sheet accounts at the beginning and end of the year are shown below.

Dec. 31, Dec. 31, Increase or 2017 2016 (Decrease)

Cash $ 277,900 $ 298,000 ($20,100)

Accounts receivable 469,424 353,000 116,424 Inventory 741,700 610,000 131,700 Prepaid expenses 12,000 8,000 4,000 Investment in subsidiary 110,500 –0– 110,500 Cash surrender value of life insurance 2,304 1,800 504 Machinery 207,000 190,000 17,000 Buildings 535,200 407,900 127,300 Land 52,500 52,500 –0–

Patents 69,000 64,000 5,000 Copyrights 40,000 50,000 (10,000)

Bond discount and issue costs 4,502 –0– 4,502

$2,522,030 $2,035,200 $486,830 Income taxes payable $ 90,250 $ 79,600 $ 10,650 Accounts payable 299,280 280,000 19,280 Dividends payable 70,000 –0– 70,000 Bonds payable—8% 125,000 –0– 125,000 Bonds payable—12% –0– 100,000 (100,000)

Allowance for doubtful accounts 35,300 40,000 (4,700)

Accumulated depreciation—buildings 424,000 400,000 24,000 Accumulated depreciation—machinery 173,000 130,000 43,000 Premium on bonds payable –0– 2,400 (2,400)

Common stock—no par 1,176,200 1,453,200 (277,000)

Paid-in capital in excess of par—common stock 109,000 –0– 109,000 Retained earnings—unappropriated 20,000 (450,000) 470,000

$2,522,030 $2,035,200 $486,830 STATEMENT OF RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31, 2017 January 1, 2017 Balance (defi cit) $(450,000)
March 31, 2017 Net income for fi rst quarter of 2017 25,000 April 1, 2017 Transfer from paid-in capital 425,000 Balance –0–
December 31, 2017 Net income for last three quarters of 2017 90,000 Dividend declared—payable January 21, 2018 (70,000)
Balance $ 20,000 Your working papers from the audit contain the following information:
1. On April 1, 2017, the existing deficit was written off against paid-in capital created by reducing the stated value of the nopar stock.
2. On November 1, 2017, 29,600 shares of no-par stock were sold for $257,000. The board of directors voted to regard $5 per share as stated capital.
3. A patent was purchased for $15,000.
4. During the year, machinery that had a cost basis of $16,400 and on which there was accumulated depreciation of $5,200 was sold for $9,000. No other plant assets were sold during the year.
5. The 12%, 20-year bonds were dated and issued on January 2, 2005. Interest was payable on June 30 and December 31. They were sold originally at 106. These bonds were redeemed at 100.9 plus accrued interest on March 31, 2017.
6. The 8%, 40-year bonds were dated January 1, 2017, and were sold on March 31 at 97 plus accrued interest. Interest is payable semiannually on June 30 and December 31. Expense of issuance was $839.
7. Alexander Corporation acquired 70% control in Crimson Company on January 2, 2017, for $100,000. The income statement of Crimson Company for 2017 shows a net income of $15,000.
8. Major repairs to buildings of $7,200 were charged to Accumulated Depreciation—Buildings.
9. Interest paid in 2017 was $10,500 and income taxes paid were $34,000.
Instructions From the information given, prepare a statement of cash flows using the indirect method. A worksheet is not necessary, but the principal computations should be supported by schedules or general ledger accounts. The company uses straight-line amortization for bond interest.