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N O 2 18 dditional information: 1. New plant assets costing $90,000 were purchased for cash during the year. 2. Old plant assets having an original cost of $30,000 were sold for $2,000 cash. 3. Bonds matured and were paid off at face value for cash. 4. A cash dividend of $40,000 was declared and paid during the year. structions repare a statement of cash flows using the indirect method. Steps: 1. Compute the change in assets, liabilities and equity: Cash Accounts Receivable Inventories Prepaid Expenses Invesments Plant Assets Accumulated Depreciation 2,01 37,000 57,000 45,000 1,000 162,000 580,000 (21000) 687.000 2,03 33,000 41000 48,000 14,000 130,000 520,000 (180,000) 606,000 Change 4,000 6,000 (3,000) 3,000 32,000 60,000 (31000) 81000 Accounts Payable Accrued Expenses Payable Bonds Payable Common Sock Retained Earnings 44,000 21000 80,000 75,000 267,000 687.000 51000 5,000 220,000 50,000 170,000 606,000 (7,000) 6,000 (40,000) 25,000 97.000 81000 2. Identify non-cash expense items that have been deducted in arriving at Net Income. They are: Depreciation Expense of $50k: Loss on disposal of 9k. Because Net Income is the starting point, these deductions must be added back to reverse the effects so that these non-cash items will not show up in the amount of cash generated from operations, 3. Adjust Net Income by the positive or negative change in current assets (except cash) and current es because these items indicate the actual cash received or paid. 4 Account for the cash effects for additional information 1. to 4 in Investing/Financing activities 5. Changes to Investments and Common Stock must be accounted for as cash transactions, ALL R OL . 15 16 17 18 19 PROBLEM 12-9B TURNER INC. Statement of Cash Flows For the Year Ended December 31, 2014 Cash flows from operating activities Net income... $137,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense...... $ 50,000 non-cash reversed Loss on disposal of plant assets 9,000 non-cash reversed (16,000) 3,000 (3.000) (7,000) 6.000 42,000 179,000 Increase in accounts receivable............................. Decrease in inventory...... .... Increase in prepaid expenses......... Decrease in accounts payable... Increase in accrued expenses payable. Net cash provided by operating activities.. Cash flows from investing activities Sale of plant assets.. Purchase of plant assets.... Purchase of investments. Net cash used by investing activities...... Cash flows from financing activities Sale of common stock.. Payment of cash dividends.. . Redemption (Repayment) of bonds... Net cash used by financing activities 2,000 N. 2 (90,000) N. 1 (32.000) - step 5 above (120,000) 25,000 - step 5 above (40,000) N. 4 (40,000) N. 3 (55.000) Net increase in cash 4,000 check figure Cash at beginning of period....... Cash at end of period... 33.000 S 37,000 N. 1 to N. 4 corresponds to additional information given in the questions