P23-2 (SCFIndirect Method) The comparative balance sheets for Hinckley Corporation show the following information. December 31 2014 2013 Cash $33,500 $13,000 Accounts receivable 12,250 10,000 Inventory 12,000 9,000 Investments 0 3,000 Building 0 29,750 Equipment 45,000 20,000 Patent 5,000 6,250 Totals $107,750 $91,000 Allowance for doubtful accounts $3,000 $4,500 Accumulated depreciation on equipment 2,000 4,500 Accumulated depreciation on building 0 6,000 Accounts payable 5,000 3,000 Dividends payable 0 5,000 Notes payable, short-term (nontrade) 3,000 4,000 Long-term notes payable 31,000 25,000 Common stock 43,000 33,000 Retained earnings 20,750 6,000 Totals $107,750 $91,000 Additional data related to 2014 are as follows: 1. Equipment that had cost $11,000 and was 40% depreciated at time of disposal was sold for $2,500 2.$10,000 of the long-term note payable was paid by issuing common stock. 3. Cash dividends paid were $5,000 " 4. On January 1, 2014,the building was completely destroyed by a flood. Insurance proceeds on the " building were $30,000 (net of $2,000 taxes). 5. Investments (available-for-sale) were sold at $1,700 above their cost. The company has made similar sales and investments in the past. 6. Cash of was paid for the acquisition of equipment. 7. A long-term note for $16,000 was issued for the acquisition of equipment. 8. Interest of $2,000 and income taxes of $6,500 were paid in cash. Instructions: Prepare a statement of cash flows using the indirect method. Flood damage is unusual and infrequent in that part of the country. HINCKLEY CORPORATION Statement of Cash Flows For the Year Ended December 31, 2014 Cash flows from operating activities Net income (a) $14,750 Adjustments to reconcile net income to net cash provided by operating activities: Loss on sale of equipment $4,100 gain from flood damage (8,250) depreciation expense 1,900 patent amortization 1,250 gain on sale of investment (1,700) increase in accounts receivable (net) (3,750) increase in inventory (3,000) increase in accounts payable 2,000 (7,450) Net cash provided by operating activities $7,300 Cash flows from investing activities sale of investment $4,700 sale of equipment 2,500 purchase of equipment (20,000) proceeds from flood damage to building 32,000 Net cash provided by investing activities $19,200 Cash flows from financing activities payment of divident ($5,000) payment of short-term notes payable (1,000) Net cash used by financing activities ($6,000) Increase in cash $20,500 cash, Jan. 1 2013 13,000 cash, Dec. 1 2013 $33,500 Supplemental disclosures of cash flow information: Cash paid during the year for: interest 2,000 income taxes 6,500 Noncash investing and financing activities note payable for common stock $10,000 purchase equipment by issue note payable 16,000 $26,000 Supporting Computations: (a) Ending retained earnings $20,750 beginning retained earnings (6,000) Net income $14,750 (b) Cost $11,000 Acummulated Depreciation(40% X 11000) 4,400 book value 6,600 proceeds from sale (2,500) Loss on sale $4,100 (c) Accumulated depreciation on equipment sold $4,400 decreased in accumulated depreciation (2,500) depreciation expense $1,900 (d) Beginning equipment balance $0 Title Amount Title Formula Title Amount Title Formula Title Amount Title Formula