Question

The income statement, balance sheets, and additional information for Communication Accessories are provided.

   

COMMUNICATION ACCESSORIES Income Statement For the Year Ended December 31, 2021
Revenues				$	2,800,000
Gain on sale of land					4,000
Total revenues					2,804,000
Expenses:
Cost of goods sold	$	1,900,000
Operating expenses		575,000
Depreciation expense		38,000
Interest expense		16,000
Income tax expense		63,000
Total expenses					2,592,000
Net income				$	212,000

  

COMMUNICATION ACCESSORIES Balance Sheets December 31
	2021				2020
Assets
Current assets:
Cash	$	182,000			$	187,000
Accounts receivable		83,000				95,000
Inventory		121,000				138,000
Prepaid rent		7,000				5,000
Long-term assets:
Investment in stock		195,000				100,000
Land		230,000				260,000
Equipment		305,000				225,000
Accumulated depreciation		(138,000	)			(100,000	)
Total assets	$	985,000			$	910,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	40,000			$	58,000
Interest payable		1,000				2,000
Income tax payable		12,000				10,000
Long-term liabilities:
Notes payable		285,000				205,000
Stockholders' equity:
Common stock		350,000				350,000
Retained earnings		297,000				285,000
Total liabilities and stockholders’ equity	$	985,000			$	910,000

  

Additional Information for 2021:

1. Purchase additional investment in stocks for $95,000.
2. Sell land costing $30,000 for $34,000 resulting in a $4,000 gain on sale of land.
3. Purchase $80,000 in equipment by borrowing $80,000 with a note payable due in three years. No cash is exchanged in the transaction.
4. The company declares and pays a cash dividend of $200,000.

Required:
Prepare the statement of cash flows using the indirect method. Disclose any noncash transactions in an accompanying note. (List cash outflows and any decrease in cash as negative amounts.)

Answer 1