Question

The comparative balance sheets and income statements for Gypsy Company follow.

Balance Sheets As of December 31
	2017			2016
Assets
Cash	$	23,243		$	2,651
Accounts receivable		2,237			1,342
Inventory		6,202			5,814
Equipment		22,837			44,607
Accumulated depreciation—equipment		(9,806	)		(16,588	)
Land		14,214			8,184
Total assets	$	58,927		$	46,010
Liabilities and equity
Accounts payable (inventory)	$	2,671		$	4,315
Long-term debt		2,695			6,160
Common stock		20,700			10,500
Retained earnings		32,861			25,035
Total liabilities and equity	$	58,927		$	46,010

Income Statement For the Year Ended December 31, 2017
Sales revenue	$	31,470
Cost of goods sold		(12,473	)
Gross margin		18,997
Depreciation expense		(3,825	)
Operating income		15,172
Gain on sale of equipment		550
Loss on disposal of land		(70	)
Net income	$	15,652

Additional Data
1.	During 2017, the company sold equipment for $18,943; it had originally cost $29,000. Accumulated depreciation on this equipment was $10,607 at the time of the sale. Also, the company purchased equipment for $7,230 cash.
2.	The company sold land that had cost $4,170. This land was sold for $4,100, resulting in the recognition of a $70 loss. Also, common stock was issued in exchange for title to land that was valued at $10,200 at the time of exchange.
3.	Paid dividends of $7,826.

Required

Prepare a statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Gypsy Company

Statement ofcash flows (indirect method):

Gypsy Company
Statement of Cash Flows (Indirect method)
for the year ended December 31, 2017
Cash flows from operating activities:
Net income		$15,652
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation expense	$3,825
gain on sale of equipment	($550)
loss on disposal of land	$70
increase in accounts receivable	($895)
increase in inventory	($388)
Decrease in accounts payable	($1,644)	$418
cash flow from operating activities		$16,070
Cash flow from investing activities:
Sale of equipment	$18,943
Sale of land	$4,100
Purchase of equipment	($7,230)
Cash flow from investing activities		$15,813
Cash flow from financing activities:
long-term debt paid	($3,465)
dividends	($7,826)
Cash flow from financing activities		($11,291)
Excess of cash		$20,592
Beginning balance of cash		$2,651
Ending balance of cash		$23,243