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Preparing a Statement of Cash FlowsIndirect Method Sterling Corporations recent comparative balance sheet and income statement follow. Balance Sheets, December 31 2019 2020 Difference Assets

Preparing a Statement of Cash FlowsIndirect Method

Sterling Corporations recent comparative balance sheet and income statement follow.

Balance Sheets, December 31 2019 2020 Difference
Assets
Cash and cash equivalents $ 74,800 $ 73,700 $ (1,100)
Accounts receivable (net) 26,400 37,400 11,000
Inventory 35,200 30,800 (4,400)
Investment, long-term 13,200 0 (13,200)
Fixed assets 176,000 215,600 39,600
Accumulated depreciation (105,600) (85,800) 19,800
Total assets $220,000 $271,700 $51,700
Liabilities and Stockholders Equity
Accounts payable $41,800 $26,400 $(15,400)
Bonds payable 22,000 66,000 44,000
Common stock, no-par 110,000 143,000 33,000
Retained earnings 46,200 61,600 15,400
Treasury stock 0 (25,300) (25,300)
Total liabilities and stockholders equity $220,000 $271,700 $51,700

Income Statement, For Year Ended December 31 2020
Sales revenue $154,000
Cost of goods sold (92,400)
Gross margin 61,600
Depreciation expense (11,000)
Other operating expenses (39,600)
Gain on sale of investments 6,600
Loss on sale of fixed assets (2,200)
Net income $15,400

Analysis of selected accounts and transactions

1. Sold fixed assets for cash; cost, $46,200, and two-thirds depreciated.

2. Purchased fixed assets for cash, $19,800.

3. Purchased fixed assets; exchanged unissued bonds of $66,000 (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, $25,300.

6. Retired bonds payable at maturity date by issuing common stock, $22,000.

7. Sold unissued common stock for cash, $11,000.

Required

Prepare the statement of cash flows for Sterling Corporation for the year ended December 31, 2020, assuming the indirect method in presenting cash flows from operating activities.

Statement of Cash Flows For the Year Ended December 31, 2020
Cash flows from operating activities
Net income Answer
Adjustments:
Depreciation expense Answer
Gain on sale of long-term investments Answer
AnswerCost of goods soldDecrease in accumulated depreciationDecrease in retained earningsGain on sale of fixed assetsIncrease in bonds payableLoss on sale of fixed assetsLoss on sale of long-term investmentsPurchase of fixed assetsPurchase of fixed assets by issuing bondsPurchase of treasury stock Answer
Increase in accounts receivable, net Answer
Decrease in inventory Answer
Decrease in accounts payable Answer
Net cash provided (used) by operating activities Answer
Cash flows from investing activities
Sale of fixed assets Answer
AnswerCost of goods soldDecrease in accumulated depreciationDecrease in retained earningsGain on sale of fixed assetsIncrease in bonds payableLoss on sale of fixed assetsLoss on sale of long-term investmentsPurchase of fixed assetsPurchase of fixed assets by issuing bondsPurchase of treasury stock Answer
Sale of long-term investment Answer
Net cash provided (used) by investing activities Answer
Cash flows from financing activities
Issue common stock Answer
AnswerCost of goods soldDecrease in accumulated depreciationDecrease in retained earningsGain on sale of fixed assetsIncrease in bonds payableLoss on sale of fixed assetsLoss on sale of long-term investmentsPurchase of fixed assetsPurchase of fixed assets by issuing bondsPurchase of treasury stock Answer
Net cash provided (used) by financing activities Answer
Net increase in cash and cash equivalents during 2020 Answer
Cash and cash equivalents, January 1, 2020 Answer
Cash and cash equivalents, December 31, 2020 Answer
Noncash Disclosure
AnswerCost of goods soldDecrease in accumulated depreciationDecrease in retained earningsGain on sale of fixed assetsIncrease in bonds payableLoss on sale of fixed assetsLoss on sale of long-term investmentsPurchase of fixed assetsPurchase of fixed assets by issuing bondsPurchase of treasury stock Answer
Retired bonds payable with common stock Answer

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