Instructions: Prepare a statement of cash flows using the indirect method.

On the basis of the following data for Grant Co. for 2010 and the preceding year ended December 31, 2009, prepare a statement of cash flows. Use the indirect method of reporting cash flows from operating activities.

Assume that equipment costing $125,000 was purchased for cash and equipment costing $85,000 with accumulated depreciation of $65,000 was sold for $15,000; that the stock was issued for cash; and that the only entries in the retained earnings account were net income of $56,000 and cash dividends declared of $18,000.

Year

Year

2010

2009

Cash

$90,000

$ 78,000

Accounts receivable (net)

78,000

85,000

Inventories

106,500

90,000

Equipment

410,000

370,000

Accumulated depreciation

(150,000)

(158,000)

$534,500

$465,000

Accounts payable (merchandise creditors)

$ 53,500

$ 55,000

Cash dividends payable

5,000

4,000

Common stock, $10 par

200,000

170,000

Paid-in capital in excess of par--

common stock

62,000

60,000

Retained earnings

214,000

176,000

$534,500

$465,000