Reference no: EM13507207

Preparing a Statement of Cash Flows with Gain on Sale of Equipment ( Indirect Method) - XS Supply Company is developing its annual financial statements at December 31, 2011. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized:

2011	2010
Balance sheet at December 31
Cash	$34,000	$29,000
Accounts receivable	35,000	28,000
Merchandise inventory	41,000	38,000
Property and equipment	121,000	100,000
Less: Accumulated depreciation	-30,000	-25,000
$201,000	$170,000
Accounts payable	$36,000	$27,000
Wages payable	1,200	1,400
Note payable, long-term	38,000	44,000
Contributed capital	88,600	72,600
Retained earnings	37,200	25,000
$201,000	$170,000
Income statement for 2011
Sales	$120,000
Gain on sale of equipment	1,000
Cost of goods sold	70,000
Other expenses	38,800
Net income	$12,200

Additional Data:

a. Bought equipment for cash, $31,000. Sold equipment with original cost of $10,000, accumulated depreciation of $7,000, for $4,000 cash .

b. Paid $6,000 on the long-term note payable.

c. Issued new shares of stock for $16,000 cash.

d. No dividends were declared or paid.

e. Other expenses included depreciation, $12,000; wages, $13,000; taxes, $6,000; and other, $7,800.

f. Accounts payable includes only inventory purchases made on credit. Because there are no liability accounts relating to taxes or other expenses, assume that these expenses were fully paid in cash.

Required:

1. Prepare the statement of cash flows for the year ended December 31, 2011, using the indirect method.

2. Evaluate the statement of cash flows.