Problem 20-4 Preparing statement of cash flows under indirect method (LO 20-1, LO 20-2, LO 20-3, LO 20-4) Neighborhood Supermarkets is preparing to go public, and you are asked to assist the firm by preparing its statement of cash flows for 20X1. Neighborhood's balance sheets at December 31, 20x0, and December 31, 20X1, and its income statement for the year ending December 31, 20X1, appear below. Neighborhood Supermarkets, Inc. Balance Sheet December 31, 20x1 20x0 $ 91,000 18,147 52, 478 228,515 6,254 396,394 $ $ 59,351 20,068 45,318 187,433 5,085 317,255 ($ in thousands) Assets Current: Cash Marketable securities Accounts receivable, net Inventories Prepaid expenses Total current assets Property and equipment: Land Buildings and improvements Equipment Leasehold improvements Accumulated depreciation Total property and equipment Goodwill Intangibles and other Total assets Liabilities Current: Accounts payable Accrued expenses Accrued self-insurance Deferred revenue Income taxes payable Total current liabilities Noncurrent: Notes payable Postretirement benefit obligations Deferred income taxes Total noncurrent liabilities Total liabilities Stockholders' Equity Common stock 86,193 417,954 673,570 139,418 (815,060) 502,075 35,162 3,843 $ 937, 474 86,003 417,954 646,427 136,589 (775,860) 511,113 15,722 4,124 $ 848,214 $ 127,865 30,227 21,998 6,731 484 187,305 $ 95,128 28,173 23,344 6,920 738 154,303 12,454 25,000 12,454 22,544 59,998 247, 303 20,357 32,811 187, 114 9,949 9,949 Retained earnings Accumulated other comprehensive income Treasury stock (at cost) Total stockholders' equity Total liabilities and stockholders' equity 826, 473 4,604 (150,855) 690,171 $ 937,474 795,473 4,560 (148,882) 661,100 $ 848,214 Neighborhood Supermarkets, Inc. Income Statement for the Year Ended December 31, 20x1 ($ in thousands) Net sales $2,516,364 Cost of sales 1,837,657 Gross profit 678, 707 Depreciation expense (47,201) Amortization expense (6,207) Self-insurance expenses (43,000) Loss on sale of equipment (60) Operating, general, and administrative expenses (486,665) Income from operations 95,574 Gain on sale of marketable securities 208 Investment income 1,556 Income before provision for income taxes 97,338 Provision for income taxes (24,335) Net income $ 73,003 Additional Information: a. The only entries in retained earnings for 20x1 were for net income and cash dividends. b. During 20X1, bad debt expenses of $906 were included in operating, general, and administrative expenses; no accounts were written off. c. Adjusting marketable securities upward by $68 led to the increase of $44 in accumulated other comprehensive income, after considering the deferred tax effect of $24. d. On July 1, 20X1, Neighborhood Supermarkets bought land ($190) and equipment ($20,000), paying $10,190 in cash and issuing a $10,000 five-year note payable with interest at 6% payable annually. Accrued interest on the note was included in operating, general, and administrative expenses because the amount was deemed too immaterial to report separately. e. No treasury stock was reissued during 20X1. f. Equipment costing $9,052 with a book value of $1,051 was sold for cash. g. A much smaller competitor was acquired on December 31, 20X1, for $34,890 cash and a 7%, $15,000 note that matures in two years. Neighborhood allocated the acquisition cost as follows: inventory, $5,500; intangibles, $5,926; equipment, $16,195; leasehold improvements, $2,829; goodwill, $19,440. Required: Use the indirect method to prepare Neighborhood Supermarkets' statement of cash flows for 20X1. (Hint Use the worksheet approach from the Chapter 4 appendix in your calculations.) (Enter your answers in thousands of dollars. Amounts to be deducted should be indicated with a minus sign.) NEIGHBORHOOD SUPERMARKETS, INC. Cash Flow Statement For the Year Ended December 31, 20X1 Cash flows from investing activities: Cash flows from financing activities: Cash balance, January 1, 20X1 Cash balance, December 31, 20X1