Intermediate Accounting 301 Quiz-Cash Flow Statement 5 points 1. Name understands that a statement of cash flows is one of the required financial statements. He asks your Preparation of a Statement of Cash Flows. The president of The Hardcastle Corporation sistance in preparing the statement. He provides you with the following comparative balance sheets for 2011 and 2010, as well as the income statement for the year ended December 31, 2011. THE HARDCASTLE CORPORATION Comparative Balance Sheets Assets Current assets: Cash Accounts receivable. Inventory Prepaid expenses Total current assets Property, plant, and equipment: Land December 31, 2011 2010 $ 5,200 $ 4,200 28,000 33,000 20,000 47,000 1.500 $ 73,700 1.000 $66.200 $ 3,800 Machinery and equipment, net Buildings, net Total property, plant, and equipment $ 54.500 Other assets: Patents, net Total assets 8,700 42,000 $ 1.500 $129,700 $ 2,800 8,500 47.000 $ 58,300 $ 1.700 $126.200 Liabilities and Owners' Equity Current liabilities: Notes payable Current maturities of long-term debt Accounts payable Accrued liabilities Total current liabilities Long-term debt: Stockholders' equity: Common stock, no par Retained eamings 2011 2010 $ 4,000 2,000 $5,800 1,800 1,900 20,000 5,500 15.000 6,000 13.000 $ 26,500 $ 18.000 $ 26.700 $ 30.000 31,900 $ 61,000 $ 60,000 24.200 $ 85.200 $129,700 9.500 $ 69.500 $126.200 Total stockholders' equity Total liabilities and stockholders' equity (continued) Revenues THE HARDCASTLE CORPORATION Statement of Income and Retained Earnings For the Year Ended December 31, 2011 Sales Expenses Cost of goods sold General and administrative Depreciation and amortization Interest Loss on early retirement of long-term debt- Loss on sale of machinery and equipment Income before taxes Less: Taxes Net income Retained carnings, January I Less: Dividends Retained eamings, December 31 $112,000 26,000 13,000 2,000 400 200 In addition, the president has provided you with the following information: 1. Included in depreciation and amortization expense are: Building depreciation Machinery and equipment depreciation $12,000 800 200 $174,000 153,600 $ 20,400 4,000 $ 16,400 9,500 (1,700) 24,200 Patent amortization 2. Machinery and equipment with a book value of $300 was sold for cash.. (Hint: Use the related Loss on the Income Statement to figure out the cash amount.) 3. The additional land was acquired in exchange for common stock. No other stock transactions took place. 4. Long-term debt with a face value of $10,000 was retired carly. (Again use the related Loss to help you figure out the cash amount.) 5. Short-term notes payable were issued for the purchase of machinery during 2009. (Hint: This means that the short-term notes should be associated with a long-term item (PPE) and you should not use it in your adjustments to Net Income when doing the indirect approach to the operations section.) 6. All other changes represent normal balance sheet transactions. 7. There is no interest accrual at year-end. Required: A. Prepare the entire Statement of Cash Flows for the year ended December 31, 2011. Use the Direct Method for the operations section. Hints/Suggestions: 1) In order to do the direct method for the operations section some assumptions will need to be made conceming what balance sheet accounts are directly associated with what income statement accounts. Please make the following assumptions: Sales go with Accounts Receivables. Cost of Goods Sold go with Inventory and Accounts Payable. General and Administrative Expenses go with Prepaid Expenses and Accrued Liabilities You may need to make other similar assumptions that you feel are reasonable. 2) When dealing with long-term debt, combine the current maturity balance with the amount shown under long-term debt before determining cash inflows or outflows for long-term debt. B. Prepare a supplemental schedule showing how the operations section of the statement would have appeared if the Indirect Method had been used. Check figure: Operations +25,000 Investing -$8,200 Financing - $15,800