The income statement, balance sheet, and additional information for Video Phones, Inc., are provided.

Additional Information for 2012:

1. Purchase investment in bonds for $105,000.

2. Sell land costing $30,000 for only $22,000, resulting in an $8,000 loss on sale of land.

3. Purchase $60,000 in equipment by borrowing $60,000 with a note payable due in three years. No cash is exchanged in the transaction.

4. Declare and pay a cash dividend of $25,000.

Required:

Prepare the statement of cash flows using the indirect method. Disclose any noncash transactions in an accompanying note.

Transcribed Image Text:

VIDEO PHONES, INC. Income Statement For the year ended December 31, 2012 $3,036,000 Expenses: Cost of goods sold Operating expenses Depreciation expense Loss on sale of land Interest expense Income tax expense $1,950,000 858,000 27,000 8,000 5,000 48,000 Total expenses 2,906,000 $ 130,000 Net income VIDEO PHONES, INC. Balance Sheet 2012 2011 Assets Current assets: Cash Accounts receivable Inventory Prepaid rent $186,000 81,000 105,000 12,000 $144,000 60,000 135,000 6,000 Long-term assets: Investments Land Equipment Accumulated depreciation 105,000 210,000 270,000 0 240,000 210,000 69 42 Total assets $900,000 $753,000 Liabilities and Stockholders' Equit Current liabilities: Accounts payable Interest payable Income tax payable $ 66,000 6,000 15,000 $ 81,000 10,000 14,000 Long-term liabilities: Notes payable 285,000 225,000 Stockholders' equity: Common stock Retained earnings 300,000 228,000 $900,000 300,000 123,000 $753,000 Total liabilities and stockholders' equity