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13#2 Prepare statement of cash flows using the indirect method. The income statement for 2021 and the balance sheets for 2021 and 2020 are presented

13#2

Prepare statement of cash flows using the indirect method. The income statement for

2021

and the balance sheets for

2021

and

2020

are presented for

Hanover

Industries, Inc.

Requirement

Prepare a statement of cash flows for

Hanover

Industries, Inc., for the year ended December 31,

2021,

using the indirect method.

Prepare the statement one section at a time. (Use parentheses or a minus sign for numbers to be subtracted and for net cash outflows.)

Hanover Industries, Inc.

Statement of Cash Flows (Indirect Method)

For the Year Ended December 31, 2021

Operating Activities:

Adjustments to reconcile net income to cash basis:

Net cash provided by (used for) operating activities

Investing Activities:

Net cash provided by (used for) investing activities

Financing Activities:

Net cash provided by (used for) financing activities

Net increase (decrease) in cash

Cash, beginning of the year

Cash, end of the year

Income statement

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A

B

C

1

Hanover Industries, Inc.

2

Income Statement

3

For the Year Ended December 31, 2021

4

Sales revenues

$952,000

5

Less: Cost of goods sold

377,000

6

Gross profit

$575,000

7

Less operating expenses:

8

Salaries and wages expense

$192,000

9

Insurance expense

13,000

10

Depreciation expense

51,200

11

Other operating expenses

81,000

12

Total operating expenses

337,200

13

Operating income

$237,800

14

Plus other income and less other expenses:

15

Interest expense

$5,600

16

Gain on sale of PP&E

3,000

17

Total other income and expenses

2,600

18

Income before income taxes

$235,200

19

Less: Income tax expense

70,560

20

Net income

$164,640

Balance sheets

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A

B

C

1

Hanover Industries, Inc.

2

Comparative Balance Sheets

3

December 31, 2021 and 2020

4

Assets

2021

2020

5

Current assets:

6

Cash

$472,000

$287,000

7

Accounts receivable

73,000

129,000

8

Inventory

335,000

220,000

9

Prepaid insurance

7,500

5,000

10

Total current assets

$887,500

$641,000

11

12

Property, plant, and equipment

$610,000

$585,000

13

Less: Accumulated depreciation

(153,000)

(111,000)

14

Investments

91,000

71,000

15

Total assets

$1,435,500

$1,186,000

16

17

Liabilities

18

Current liabilities:

19

Accounts payable (inventory purchases)

$53,000

$31,000

20

Wages payable

16,600

17,600

21

Interest payable

1,800

400

22

Income taxes payable

61,560

11,500

23

Other accrued expenses payable

6,200

3,000

24

Total current liablities

$139,160

$63,500

25

26

Long-term liabilities

65,000

23,000

27

Total liabilities

$204,160

$86,500

28

29

Stockholders' equity

30

Common stock

$610,000

$610,000

31

Retained earnings

621,340

489,500

32

Total stockholders' equity

$1,231,340

$1,099,500

33

34

Total liabilities and equity

$1,435,500

$1,186,000

Additional information

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Additional information follows:

a.

Sold plant asset for

$4,000.

The original cost of this plant asset was

$10,200

and it had

$9,200

of accumulated depreciation associated with it.

b.

Paid

$8,000

on the bonds payable; issued

$50,000

of new bonds payable.

c.

Declared and paid cash dividends of

$32,800.

d.

Purchased new investment for

$20,000.

Paid cash.

e.

Purchased new equipment for

$35,200.

Paid cash

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