Problem 12-7B Prepare a Statement of Cash Flows [LO12-1, LO12-2] A comparative balance sheet and income statement for Groton Company follow: Groton Company Comparative Balance Sheet December 31, 2011 and 2010 2011 2010 Assets Cash $ 1 $ 12 Accounts receivable 306 229 Inventory 158 196 Prepaid expenses 8 6 Total current assets 473 443 Property, plant, and equipment Less accumulated depreciation 509 (85) 430 (71) Net property, plant, and equipment 424 359 Long-term investments 25 32 Total assets $ 922 $ 834 Liabilities and Stockholders' equity Accounts payable Accrued liabilities Income taxes payable $ 301 70 72 $ 225 80 63 Total current liabilities Bonds payable 443 198 368 172 Total liabilities 641 540 Common stock Retained earnings 163 118 202 92 Total stockholders' equity 281 294 Total liabilities and stockholders' equity $ 922 $ 834 Total liabilities 641 540 Common stock Retained earnings 163 118 202 92 Total stockholders' equity 281 294 Total liabilities and stockholders' equity $ 922 $ 834 Groton Company Income Statement For the Year Ended December 31, 2011 Sales $ 754 Cost of goods sold 448 306 Gross margin Selling and administrative expenses 222 84 Net operating income Non operating items: Gain on sale of investments Loss on sale of equipment $ 6 (2) 4 88 Income before taxes Income taxes 23 Net income $ 65 During 2011, Groton sold some equipment for $19 that had cost $31 and on which there was accumulated depreciation of $10. In addition, the company sold long-term investments for $13 that had cost $7 when purchased several years ago. A cash dividend was paid during 2011 and the company repurchased $39 of its own stock. Groton did not retire any bonds during 2011. Required: 1. Using the indirect method, determine the net cash provided by (used in) operating activities for 2011. (Negative amount should be entered with a minus sign.) Net cash operating activities 2. Using the information in (1) above, along with an analysis of the remaining balance sheet accounts, prepare a statement of cash flows for 2011. (Amounts to be deducted and negative amounts should be indicated with a minus sign.) $ 65 Groton Company Statement of Cash Flows - Indirect Method For the Year Ended December 31, 2011 Operating activities: Net income Adjustments to convert net income to cash basis: Depreciation 24 Gain on sale of investments (6) Loss on sale of equipment 2 Increase in accounts receivable (77) Increase in prepaid expenses Increase in accounts payable Decrease in accrued liabilities Increase in income taxes payable (57) 8 Investing activities: 0 Financing activities: 0 8 Cash balance, January 1, 2011 Cash balance, December 31, 2011 $ 8
