14-18A (Algo) Using financial statements to prepare a statement of cash flows-indirect method LO 14-1, 14-3, 14-4 The comparative balance sheets and income statements for Thornton Company follow: Balance Sheets As of December 31 Year 2 Year 1 Assets Cash Accounts receivable Inventory Equipment Land $21,644 $ 2,980 2,427 1,456 6,396 17,698 Accumulated depreciation-equipment Total assets (9,481) 17,071 $55,755 5,996 40,208 (18,251) 10,151 $ 42,540 Liabilities and equity Accounts payable (inventory) $ 2,774 $ 4,481 Long-term debt 2,824 6,455 Common stock 20,600 10,000 Retained earnings Total liabilities and equity 29,557 21,604 $55,755 $ 42,540 Income Statement For the Year Ended December 31, Year 2 Sales revenue Cost of goods sold. Gross margin $ 30,600 (12,129) 18,471 Depreciation expense (3,885) Operating income Gain on sale of equipment 15,386 600 Loss on disposal of land Net income (80) $ 15,906 Additional Data 1. During Year 2, the company sold equipment for $18,145; it had originally cost $29,400. Accumulated depreciation on this equipment was $11,855 at the time of the sale. Also, the company purchased equipment for $6,890 cash. 2. The company sold land that had cost $3,680. This land was sold for $3,600, resulting in the recognition of a $80 loss. Also, common stock was issued in exchange for title to land that was valued at $10,600 at the time of exchange. 3. Paid dividends of $7,953. Required Prepare a statement of cash flows using the indirect method. (Amounts to be deducted and cash outflows should be indicated by a minus sign.) THORNTON COMPANY Statement of Cash Flows For the Year Ended December 31, Year 2 Cash flows from operating activities Net income $ 15,906 Less: Increase/Decrease in current assets and current liabilities: Depreciation expense Plus: Noncash charges $ 15,906 Cash flows from investing activities: Plus: Noncash charges $ Cash flows from investing activities: 15,906 0 Cash flows from financing activities: 0 15,906 Ending cash balance $ 15,906 Schedule of noncash investing and financing activities