Question

The balance sheets of Dolan Company, for December 31, 2014 and 2013, are as follows:

	2014	2013
Cash	$  68,000	$  42,500
Accounts receivable (net)	61,000	70,200
Inventories	121,000	105,000
Investments	.....	100,000
Equipment	515,000	425,000
Accumulated depreciation-equipment	(153,000)	(175,000)
	$612,000	$567,700
Accounts payable	$  59,750	$  47,250
Bonds payable, due 2010	.....	75,000
Common stock, $20 par	375,000	325,000
Premium on common stock	50,000	25,000
Retained earnings	127,250	95,450
	$612,000	$567,700

Additional information:

(a)	Net income, $71,800.
(b)	Depreciation reported on income statement, $38,000.
(c)	Fully depreciated equipment costing $60,000 was scrapped, no salvage, and equipment was purchased for $150,000.
(d)	Bonds payable for $75,000 were retired by payment at their face amount.
(e)	2,500 shares of common stock were issued at $30 for cash.
(f)	Cash dividends declared and paid, $40,000.
(g)	Investments of $100,000 were sold for $125,000.

Required: Prepare a statement of cash flows using the indirect method.

Answer 1

	Statement of Cash Flows
	For the Year Ended December 31, 2014
Cash Flows from Operating Activities:
Net income		71800
Adjustments to reconcile net income to
Net cash provided by operating activities
Depreciation expense	38000
Gain on Sale of investments	-25000
Decrease in Accounts receivable	9200
Increase in inventory	-16000
Increase in accounts payable	12500
		18700
Net cash provided by operating activities		90500
Cash Flows from Investing Activities:
Purchase of Equipment	-150000
Sale of Investments	125000
Net Cash used by Investing Activities		-25000
Cash Flows from Financing Activities
Payment of Cash Dividends	-40000
Redemption of Bonds Payable	-75000
Issuance of Capital Stock	75000
Net Cash Used by Financing Activities		-40000
Net Increase in Cash		25500
Cash at Beginning of Period		42500
Cash at End of Period		68000