The 2017 and 2016 balance sheets of Gibson Corporation follow. The 2017 income statement is also provided. Gibson had no noncash investing and financing transactions during 2017. During the year, the company sold equipment for $15,200, which had originally cost $12,800 and had a book value of $11,300. The company did not issue any notes payable during the year but did issue common stock for $31,000. The company purchased plant assets and long-term investments with cash.

Requirements
1. Prepare the statement of cash flows for Gibson Corporation for 2017 using the indirect method.
2. Evaluate the company's cash flows for the year. Discuss each of the categories of cash flows in your response.

Transcribed Image Text:

Gibson Corporation Income Statement For the Year Ended December 31, 2017 2. 4 344,000 77,000 267,000 5 Sales revenues 6 Less: Cost of goods sold 7 Gross profit 8 Less operating expenses: Salarles and wages expense 25,000 4,700 13,000 9. Depreciation expense 10 Other operating expenses Total operating expenses 11 12 13 Operating Income 14 Plus other Income and less other expenses: Interest expense 42,700 224,300 9,300 3,900 15 16 17 Gain on sale of PP&E Total other Income and expenses 5,400 218,900 36,500 182,400 18 Income before Income taxes 19 Less: Income tax expense 20 Net Income IS 21 Gibson Corporation Comparative Balance Sheets December 31, 2017 and 2016 Assets 2017 2016 5 Current assets: Cash 6. Accounts recelvable 8 Inventory 9 Prepald Insurance Total current assets 48,500 $ 32,300 86,500 3,000 170,300 S 20,500 29,900 93,000 2,500 145,900 10 11 12 Proper ty, plant, and equlpment 13 Less: Accumulated depreciation 14 Investments 15 Total assets 16 17 18 Current llabilities: 19 Accounts payable 20 Wages payable 21 Interest payable 22 Income taxes payable 151,000 (30,600) 110,000 400,700 S 134,000 (27,400) 252,500 Ljabilities 33,400 S 2,700 36,700 1,600 2,800 5,500