Question

In: Accounting

On the basis of the following data for Larson Co. for the year ending December 31...

On the basis of the following data for Larson Co. for the year ending December 31 Year 2, and the preceding year ended December 31 Year 1, prepare a statement of cash flows. Use the indirect method of reporting cash flows from operating activities. In addition to the balance sheet data, assume that: (Q.10)

Equipment costing $125,000 was purchased for cash.
Equipment costing $85,000 with accumulated depreciation of $65,000 was sold for $15,000.
The stock was issued for cash.
The only entries in the retained earnings account were net income of $51,000 and cash dividends declared of $13,000.

Year 2

Year 1

Assets

Cash

$100,000

$78,000

Accounts receivable (net)

78,000

85,000

Inventories

101,500

90,000

Equipment

410,000

370,000

Accumulated depreciation

(150,000)

(158,000)

Total assets

$539,500

$465,000

Liabilities and Stockholders' Equity

Accounts payable (merchandise creditors)

$58,500

$55,000

Cash dividends payable

5,000

4,000

Common stock, $10 par

200,000

170,000

Paid-in capital in excess of par—common stock

62,000

60,000

Retained earnings

214,000

176,000

Total liabilities and stockholders' equity

$539,500

$465,000

Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

Larson Co.
Statement of Cash Flows
For Year Ended December 31, Year 2
Cash flows from operating activities:
$
Adjustments to reconcile net income to net cash flow from operating activities:
Changes in current operating assets and liabilities:
Net cash flow from operating activities $
Cash flows from investing activities:
$
Net cash flow used for investing activities
Cash flows from financing activities:
$
Net cash flow provided by financing activities:
$
Cash at the beginning of the year
Cash at the end of the year $

Solutions

Expert Solution

Solution

Larson Co.
Statement of Cash Flows
For the Year Ended December 31, Year 2
Cash flows from operating activities:
Net income $     51,000.00
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense $     57,000.00
Loss on disposal of Equipment $       5,000.00
Changes in current operating assets and liabilities:
Decease in accounts receivables $       7,000.00
Increase in inventory $    (11,500.00)
Increase in accounts payable $       3,500.00
$     61,000.00
Net cash from Operating Activities $ 1,12,000.00
Cash flows from investing activities:
Sale of Equipment $     15,000.00
Purchase of Equipment $ (1,25,000.00)
Net cash from Investing Activities $ (1,10,000.00)
Cash flows from financing activities:
Issue of Common stock $     32,000.00
Dividends paid $    (12,000.00)
Net cash from Financing Activities $     20,000.00
Net change in cash during the year $     22,000.00
Add: Beginning cash balance $     78,000.00
Ending cash balance $ 1,00,000.00

Dividend paid in cash = Dividend declared minus increase in dividend payable.


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