Preparing a Statement of Cash Flows$$Indirect Method

Sterling Corporation$$s recent comparative balance sheet and income statement follow.

Balance Sheet, December $31$ Prior Year Current Year Difference

Assets

Cash and cash equivalents $$27,200$ $$26,800$ $$(400)$

Accounts receivable $($net$)9,60013,6004,000$

Inventory $12,80011,200(1,600)$

Investment, long$-$term $4,800-(4,800)$

Fixed assets $64,00078,40014,400$

Accumulated depreciation $(38,400)(31,200)7,200$

Total assets $$80,000$ $$98,800$ $$18,800$

Liabilities and Stockholders' Equity

Accounts payable $$15,200$ $$9,600$ $$(5,600)$

Bonds payable $8,00024,00016,000$

Common stock, no$-$par $40,00052,00012,000$

Retained earnings $16,80022,4005,600$

Treasury stock $-(9,200)(9,200)$

Total liabilities and stockholders' equity $$80,000$ $$98,800$ $$18,800$

Income Statement, For

Year Ended, December $31$ Current Year

Sales revenue $$56,000$

Cost of goods sold $(33,600)$

Gross margin $22,400$

Depreciation expense $(4,000)$

Other operating expenses $(14,400)$

Gain on sale of investments $2,400$

Loss on sale of fixed assets $(800)$

Net income $$5,600$

Analysis of selected accounts and transactions

$1.$ Sold fixed assets for cash; cost, $$16,800,$ and two$-$thirds depreciated.

$2.$ Purchased fixed assets for cash, $$7,200.$

$3.$ Purchased fixed assets; exchanged bonds of $$24,000($face value and fair value$)$ in payment.

$4.$ Sold the long$-$term investments for cash. Assume carrying value of the investment is equal to its original purchase price.

$5.$ Purchased treasury stock for cash, $$9,200.$

$6.$ Retired bonds payable at maturity date by issuing common stock, $$8,000.$

$7.$ Issued common stock for cash, $$4,000.$

Prepare the statement of cash flows for the current year ended December $31,$ assuming the indirect method is used in presenting cash flows from operating activities.

$$ Note: Indicate a subtraction in the cash flow statement with a negative sign with the amount.

Statement of Cash Flows

For the Year Ended December $31$

Cash flows from operating activities

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Adjustments:

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Cash flows from investing activities

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Cash flows from financing activities

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Noncash Disclosure

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