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In: Accounting

Tulip Inc.’s balance sheet is as follows: Balance Sheet January 1 December 31 Assets: Cash $...

Tulip Inc.’s balance sheet is as follows:

Balance Sheet

January 1

December 31

Assets:

Cash

$ 12,000

$ 7,000

Accounts receivable

2,000

11,000

Inventory

24,000

39,000

Long-term investments

9,000

23,000

Property, plant, & equipment

100,000

83,000

Less accumulated depreciation

(62,000)

(66,000)

Total

$ 85,000

$97,000

Liabilities and stockholders’ equity:

Accounts payable

$ 28,000

$ 9,000

Income taxes payable

2,000

1,000

Bonds payable

10,000

16,000

Common stock

30,000

42,000

Retained earnings

15,000

29,000

Total

$85,000

$97,000

Tulip reported net income of $34,000 and paid $20,000 of cash dividends. No equipment was purchased, and no long-term investments were sold. There was a gain of $3,000 when equipment was sold. The accumulated depreciation on the equipment that was sold was $12,000. Prepare Tulip’s statement of cash flows using the indirect method.

Solutions

Expert Solution

Statement of cash flows

                                              Particulars

     $

       $

I. Cash flow from Operating Activities

Net income

34,000

Add: Adjustments to reconcile net income to net cash provided by operating activities

          Depreciation on equipment

16,000

          Gain on sale of equipment

-3,000

Changes in current operating assets and liabilities:

Accounts receivable increase

-9,000

Inventory increase

-15,000

     Accounts payable decrease

-19,000

Income tax payable decrease

-1,000

   Accrued expenses payable increase

Net cash provided by Operating Activities

3,000

II. Cash flow from Investing Activities

        Sale of equipment

8,000

        Purchase of investments

-14,000

Net cash used in Investing Activities

-6,000

III. Cash flow from Financing Activities

   Issue of common stock

12,000

         Issue of Bonds

6,000

         Dividend paid

-20,000

        Net cash provided by Financing Activities     

-2,000

Net increase in Cash and Cash Equivalents(I +II +III)

-5,000

Add: Cash in the beginning of the period

12,000

       Cash at the end of the period

7,000

Equipment

Beginning balance 100,000 Accumulated depreciation 12,000
Gain on sale 3,000 Cash (Sale) (Balance figure) 8,000
Ending balance 83,000
103,000 103,000

Accumulated depreciation - Equipment

Equipment 12,000 beginning balance 62,000
Ending balance 66,000 Depreciation (balancing figure) 16,000
78,000 78,000

ekkarill92 answered 2 years ago
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