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 GibsonGibson ​Industries, Inc.

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Requirement

Prepare a statement of cash flows for

GibsonGibson

​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:
	Net cash provided by (used for) operating activities

DATA INCOME STATEMENT

Prepare statement of cash flows using the indirect method. The income statement for 2017and the balance sheets for

2017 and 2016 are presented for GibsonGibson ​Industries, Inc.

LOADING...

​(Click the icon to view the income​ statement.)                                            

LOADING...

​(Click the icon to view the balance​ sheets.)

LOADING...

​(Click the icon to view additional​ information.)

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		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 Liabilities Current liabilities: Accounts payable (inventory purchases) $60,000 $39,000 Wages payable 16,100 17,000 Interest payable 1,800 500 Income taxes payable 57,390 11,000 Other accrued expenses payable 6,000 3,000 Total current liablities $141,290 $70,500 Long-term liabilities 61,000 28,000 Total liabilities $202,290 $98,500 Stockholders' equity Common stock $603,000 $603,000 Retained earnings 633,210 481,000 Total stockholders' equity $1,236,210 $1,084,000 Total liabilities and equity $1,438,500 $1,182,500
ADDITIONAL INFORMATION
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.
	Net cash provided by (used for) operating activities

Answer 1

Solution

Gibson Industries Inc
Cash Flow Statement (indirect Method) for the year ended December 31, 2017
Cash from Operating Activities:
Net Income		$154,910
Adjustments reconcile net income to cash basis:
Add: Decrease in accounts receivable		$58,000
Less: Increase in Inventory		($108,000)
Less: Prepaid insurance		($3,000)
Add: Depreciation		$57,500
Add: Increase in accounts payable		$21,000
Less: Decrease in Wages payable		($900)
Add: Increase in Interest payable		$1,300
Add: Increase in income taxes payable		$46,390
Add: Increase in other accrued expenses payable		$3,000
Less: Gain on sale of plant assets		($3,000)
Cash from Operating Activities		$227,200
Cash flow from Investing Activities:
Proceeds from sale of Plant assets		$4,100
Purchase of Investments		($13,000)
Purchase of Equipment		($70,600)
Increase in Long-term liabilities		$37,000
Bonds payable discharged		($4,000)
Cash from Investing Activities		($46,500)
Cash flow from Financing Activities:
Cash dividends paid		($2,700)
Cash flow from Financing Activities		($2,700)
Net increase in cash		$178,000
Beginning Cash balance		$292,000
Ending Cash balance		$470,000

Notes:

No change in common stock.

Net income is computed as follows,

Ending retained earnings        $633,210

Add: Dividends paid              $2,700

Less: Beginning balance         -$481,000

Net Income                             $154,910

Depreciation expense is computed as follows,

Difference in accumulated depreciation         $155,000 - $107,000 = $48,000

Add: depreciation on plant assets sold           $9,500

Depreciation expense for 2017                       $57,500

Gain on plant assets sold is computed as follows,

Cost of plant assets sold         $10,600

Less: Accumulated depreciation         $9,500

Book value of assets               $1,100

Less: Sale proceeds                 $4,100

Gain on sale                            $3,000