P12-5 (Static) (Supplement B) Preparing a Statement of Cash Flows with Gain on Sale of Equipment (Indirect Method) LO12-2, 12-4, 12-6

XS Supply Company is developing its annual financial statements at December 31, current year. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized below:

	Current Year				Prior Year
Balance sheet at December 31
Cash	$	34,000			$	29,000
Accounts receivable		35,000				28,000
Merchandise inventory		41,000				38,000
Property and equipment		121,000				100,000
Less: Accumulated depreciation		(30,000	)			(25,000	)
	$	201,000			$	170,000
Accounts payable	$	36,000			$	27,000
Wages payable		1,200				1,400
Note payable, long-term		38,000				44,000
Common stock and additional paid-in capital		88,600				72,600
Retained earnings		37,200				25,000
	$	201,000			$	170,000
Income statement for current year
Sales	$	120,000
Gain on sale of equipment		1,000
Cost of goods sold		70,000
Other expenses		38,800
Net income	$	12,200

Additional data:

Bought equipment for cash, $31,000. Sold equipment with original cost of $10,000, accumulated depreciation of $7,000, for $4,000 cash.

Paid $6,000 on the long-term note payable.

Issued new shares of stock for $16,000 cash.

No dividends were declared or paid.

Other expenses included depreciation, $12,000; wages, $13,000; taxes, $6,000; and other, $7,800.

Accounts payable includes only inventory purchases made on credit. Because there are no liability accounts relating to taxes or other expenses, assume that these expenses were fully paid in cash.

Required:

1. Prepare the statement of cash flows for the year ended December 31, current year, using the indirect method.