Question 4 [30 points]

Use the Southgate Inc. financial statements and supplementary information given below to prepare a statement of cash flows for the year ended December 31, 2014, using the indirect method.

a. Purchased equipment for $28,000 cash. b. Sold the long-term investment on January 1, 2014 for $43,000. c. Sold equipment for $14,500 cash that had originally cost $44,000 and had $29,500 of accumulated depreciation. d. Issued $42,000 of bonds payable at face value. e. The short-term investment is a treasury bill that was purchased with maturity in 90 days. Star Inc. Statement of Cash Flows (select one) Cash flows from operating activities Southgate Inc. Comparative Balance Sheet Information December 31 Assets 2014 2013 Cash, 147,800 145,000 Short-term investments, 216,000 202,000 Accounts receivable 65,800 50,000 Merchandise inventory 24,600 33,000 Long term investment 0 22,000 Equipment 184,000 200.000 Accumulated depreciation (113,500) (105,000) Total assets 524,700 547,000 Adjust. to reconcile net income to cash provided by oper. act. Cash flows from investing activities Cash flows from financing activities Liabilities and Equity Accounts payable Dividends payable Bonds payable Share capital Retained earnings Total liabilities and equity. 44,700 4,000 42,000 354,000 80,000 524,700 62,000 27,000 0 354,000 104,000 547,000 Net increase (decrease) in cash. Cash at beginning of year Cash at end of year. Southgate Inc. Income Statement For Year Ended December 31, 2014 Sales 580,000 Cost Of Goods Sold 560,000 Depreciation expense Other expenses 27,000 (625,000) Gain on sale of long-term investment 21,000 Net loss 24,000 38,000