Question
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: |
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| Adjustments to reconcile net income to cash basis: |
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| Net cash provided by (used for) operating activities |
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| Investing Activities: |
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| Net cash provided by (used for) investing activities |
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| Financing Activities: |
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| Net cash provided by (used for) financing activities |
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| Net increase (decrease) in cash |
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| Cash, beginning of the year |
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| Cash, end of the year |
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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: |
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8 | Salaries and wages expense | $192,000 |
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9 | Insurance expense | 13,000 |
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10 | Depreciation expense | 51,200 |
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11 | Other operating expenses | 81,000 |
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| Total operating expenses |
| 337,200 |
13 | Operating income |
| $237,800 | |
14 | Plus other income and less other expenses: |
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15 | Interest expense | $5,600 |
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16 | Gain on sale of PP&E | 3,000 |
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| 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: |
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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 | |
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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 | |
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17 | Liabilities |
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18 | Current liabilities: |
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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 | |
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26 | Long-term liabilities | 65,000 | 23,000 | |
27 | Total liabilities | $204,160 | $86,500 | |
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29 | Stockholders' equity |
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30 | Common stock | $610,000 | $610,000 | |
31 | Retained earnings | 621,340 | 489,500 | |
32 | Total stockholders' equity | $1,231,340 | $1,099,500 | |
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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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