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The comparative balance sheets and income statements for Finch Company follow: Balance Sheets As of December 31 Year 2 Year 1 Assets Cash $22, 081
The comparative balance sheets and income statements for Finch Company follow: Balance Sheets As of December 31 Year 2 Year 1 Assets Cash $22, 081 $2,997 Accounts receivable 1, 842 1, 105 Inventory 6, 444 6, 041 Equipment 19, 317 40, 837 Accumulated depreciation-equipment (9,116) (17,207) Land 15, 643 8, 493 Total assets $56, 211 $42, 266 Liabilities and equity Accounts payable (inventory) $2, 686 $4, 340 Long-term debt 2, 742 6, 268 Common stock 20, 100 9 ,500 Retained earnings 30, 683 22, 158 Total liabilities and equity $56, 211 $42, 266 Income Statement For the Year Ended December 31, Year 2 Sales revenue $32, 370 Cost of goods sold (12,830) Gross margin 19,540 Depreciation expense (3,090)Sales revenue $32, 370 Cost of goods sold (12,830) Gross margin 19, 540 Depreciation expense (3, 090) Operating income 16,450 Gain on sale of equipment 650 Loss on disposal of land (50) Net income $17, 050 K Additional Data 1. During Year 2, the company sold equipment for $18,069; it had originally cost $28,600. Accumulated depreciation on this ices equipment was $11,181 at the time of the sale. Also, the company purchased equipment for $7,080 cash. 2. The company sold land that had cost $3,450. This land was sold for $3,400, resulting in the recognition of a $50 loss. Also, common stock was issued in exchange for title to land that was valued at $10,600 at the time of exchange. 3. Paid dividends of $8,525. Required Prepare a statement of cash flows using the indirect method. Note: Amounts to be deducted and cash outflows should be indicated by a minus sign. FINCH COMPANY Statement of Cash Flows For the Year Ended December 31, Year 2FINCH COMPANY Statement of Cash Flows For the Year Ended December 31, Year 2 Cash flows from operating activities: Net income Less: Increase/Decrease in current assets and current liabilities: Decrease in accounts payable Increase in inventory Increase in accounts receivable Plus: Noncash charges Plus: Loss on disposal of land Less: Gain on sale of equipment Cash flows from investing activities: Proceeds from sale of equipment Paid to purchase equipment
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