P16-34A Preparing the statement of cash flows-indirect method with non-cash transactions The 2018 income statement and comparative balance sheet of Rolling Hills, Inc. follow: ROLLING HILLS, INC. Income Statement Year Ended December 31, 2018 Net Sales Revenue $ 440,000 Cost of Goods Sold 209,200 Gross Profit 230,800 Operating Expenses: $ 77,400 Salaries Expense Depreciation Expense-Plant Assets Other Operating Expenses 14,400 10,200 102,000 Total Operating Expenses Operating Income 128,800 Other Income and (Expenses): Interest Revenue 8,700 Interest Expense (21,100) Total Other Income and (Expenses) (12,400) 116,400 Net Income Before Income Taxes 20,000 Income Tax Expense $ 96,400 Net Income ROLLING HILLS, INC Comparative Balance Sheet December 31, 2018 and 2017 2018 2013 Assets Current Asset 5 26.900 $15.700 26.500 25.400 79.800 91.500 Cash Accounts Receivable Merchandise Inventory Long term Assets Land 35.100 14,000 124,840 114,650 Plant Assets (37.950) Accumulated Depreciation Plant Assets (18.940) $274,200 $ 243.300 Total Assets Liabilities 5 30,400 $ 35,700 28,700 30,300 Current Liabilities: Accounts Payable Accrued Liabilities Long-term Liabilities: Notes Payable Total Liabilities 79,000 108,000 143,400 168,700 Stockholders' Equity 88.900 64,500 41,900 10,100 Common Stock, no par Retained Earnings Total Stockholders' Equity Total Liabilities and Stockholders' Equity 130,800 74,600 $ 274,200 5 243,300 Additionally, Rolling Hills purchased land of $21.100 by financing it 100% with long term notes payable during 2018. During the year, there were no sales of land, no retirements of stock, and no treasury stock transactions. A plant assct was disposed for 50. The cost and the accumulated depreciation of the disposed asset was $13,416. The plant acquisition was for cash. Requirements 1. Prepare the 2018 statement of cash flows, formatting operating activities by the indirect method. 2. How will what you learned in this problem help you evaluate an investment Prepare the 2018 statement of cash flows, formatting operating activnes by the indirect method 2. How wil what you learned in this problem help you evaluate an investment? Solution: Requirement1 ROLLING HILLS, INC. Statement of Cash Flows Year Ended December 31, 2018 Pant Assets Accumulated Depreciation-Pont Assets Retained Earnings Notes Payable Requirement 2