Question

Prepare statement of cash flows using the indirect method. The income statement for 2017 and the balance sheets for 2017 and 2016 are presented for Gibson​ Industries, Inc.

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Requirement

Prepare a statement of cash flows for Gibson Industries, Inc., for the year ended December​ 31,2017​,

using the indirect method.

Prepare the statement one section at a time. ​(Use parentheses or a minus sign for numbers to be subtracted and for net cash​ outflows.)

	Gibson Industries, Inc.
	Statement of Cash Flows (Indirect Method)
	For the Year Ended December 31, 2017
	Operating Activities:
	Adjustments to reconcile net income to cash basis:
			DATA

INCOME STATEMENT

Gibson Industries, Inc.

Income Statement

For the Year Ended December 31, 2017

Sales revenues

$955,000

Less: Cost of goods sold

384,000

Gross profit

$571,000

Less operating expenses:

Salaries and wages expense

$195,000

Insurance expense

12,000

Depreciation expense

57,500

Other operating expenses

83,000

Total operating expenses

347,500

Operating income

$223,500

Plus other income and less other expenses:

Interest expense

$5,200

Gain on sale of PP&E

3,000

DATA

BALANCE SHEET

Gibson Industries, Inc.

Comparative Balance Sheets

December 31, 2017 and 2016

Assets

2017

2016

Current assets:

Cash

$470,000

$292,000

Accounts receivable

70,000

128,000

Inventory

328,000

220,000

Prepaid insurance

6,500

3,500

Total current assets

$874,500

$643,500

Property, plant, and equipment

$630,000

$570,000

Less: Accumulated depreciation

(155,000)

(107,000)

Investments

89,000

76,000

Total assets

$1,438,500

$1,182,500

ADITIONAL INFOFMATION

Additional information​ follows:

a.	Sold plant asset for $ 4 comma 100$4,100. The original cost of this plant asset was $ 10 comma 600$10,600 and it had $ 9 comma 500$9,500 of accumulated depreciation associated with it.
b.	Paid $ 4 comma 000$4,000 on the bonds​ payable; issued $ 37 comma 000$37,000 of new bonds payable.
c.	Declared and paid cash dividends of $ 2 comma 700$2,700.
d.	Purchased new investment for $ 13 comma 000$13,000. Paid cash.
e.	Purchased new equipment for $ 70 comma 600$70,600. Paid cash.

Answer 1

Gibson Industries, Inc.
Statement of Cash Flows
For the year ended Dec 31,2017
Cash flows from operating activities
Net income	$          221,300
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	$            57,500
Profit on sale of plant & equipment	$            (3,000)
Accounts Receivable	$            58,000
Inventory	$       (108,000)
Prepaid expenses	$            (3,000)
Accounts Payable	$            21,000
Accrued expenses	$          (16,600)
Net cash provided by operating activities	$          227,200
Cash flows from Investing activities
Purchase of plant & equipment	$          (70,600)
Proceeds from sale of equipment	$              4,100
Acquisition of investment	$          (13,000)
Net cash used by investing activities	$          (79,500)
Cash flows from Financing activities
Dividend paid	$            (2,700)
Proceeds from Bond issue	$            37,000
Redemption of bonds payable	$            (4,000)
Net cash used by financing activities	$            30,300
Net increase in CCE	$          178,000
CCE at beginning of year	$          292,000
CCE at end of year	$          470,000