Statement of Cash Flows (Indirect Method) Dair Company's income statement and comparative balance sheets follow. DAIR COMPANY Income Statement For Year Ended December 31, 2011 Sales 700,000 Cost of goods sold Wages and other operating expenses Depreciation expense $ 440,000 95,000 22,000 7,000 Amortization expense 6,000 Interest expense Income tax expense Loss on bond retirement Net income 34,000 5,000 609,000 $91,000 DAIR COMPANY Balance Sheets Dec. 31, 2011 Dec. 31, 2010 Assets Cash $ 45,000 $ 22,000 48,000 53,000 103,000 112,000 Accounts receivable Inventory Prepaid expenses Plant assets 12,000 11,000 358,000 329,000 (87,000) (84,000) Accumulated depreciation Intangible assets Total assets Liabilities 43,000 $ 527,000 50,000 $ 488,000 and $ 33,000 $ 26,000 2,000 7,000 3,000 8,000 Stockholders' Equity Accounts payable Interest payable Income tax payable Bonds payable Common stock Retained earnings Total liabilities and equity 65,000 117,000 252,000 228,000 172,000 102,000 $ 527,000 $ 488,000 During 2011, the company sold for $17,000 cash old equipment that had cost $36,000 and had $19,000 accumulated depreciation. Also in 2011, new equipment worth $65,000 was acquired in exchange for $65,000 of bonds payable, and bonds payable of $117,000 were retired for cash at a loss. A $21,000 cash dividend was declared and paid in 2011. Any stock issuances were for cash. (a) Compute the change in cash that occurred in 2011. Cash, December 31, 2011 $ Cash, December 31, 2010 Cash increase during 2011 $ (b) Prepare a 2011 statement of cash flows using the indirect method. Use negative signs with answers to show a decrease in cash. DAIR COMPANY STATEMENT OF CASH FLOWS FOR YEAR ENDED DECEMBER 31, 2011 Net Cash Flow from Operating Activities Net Income Add (Deduct) Items to Convert Net Income to Cash Basis Depreciation Amortization expense Loss on Bond Retirement Accounts Receivable Increase Inventory Decrease Prepaid Expenses Increase Accounts Payable Increase Interest Payable Decrease Income Tax Payable Decrease Net Cash Provided by Operating Activities Cash Flows from Investing Activities Sale of Equipment Cash Flows from Financing Activities Retirement of Bonds Payable Issuance of Common Stock Payment of Dividends Net Cash Used by Financing Activities Net Increase in Cash Cash at Beginning of Year Cash at End of Year (c) Prepare separate schedules showing (1) cash paid for interest and for income taxes and (2) noncash investing and financing transactions. (1) Supplemental Cash Flow Disclosures Cash Paid for Interest Cash Paid for Income Taxes ta (2) Schedule of Noncash Investing and Financing Activities Issuance of Bonds Payable to Acquire Equipment