Reference no: EM131794429

General Guidelines:

1. Organization and proper indication of answers will be taken into account in the grade.
2. No digital answers will be taken into account.
3. All calculations must be provided.

1. On the basis of the following data for Larson Co. for the year ending December 31, 2011 and the preceding year ended December 31, 2010, prepare a statement of cash flows. Use the indirect method of reporting cash flows from operating activities. In addition to the balance sheet data, assume that:

Equipment costing $125,000 was purchased for cash.
Equipment costing $85,000 with accumulated depreciation of $65,000 was sold for
$15,000.
The stock was issued for cash.

The only entries in the retained earnings account were net income of $51,000 and cash dividends declared of $13,000.

	Year	Year
	2011	2010
Cash	$100,000	$ 78,000
Accounts receivable (net)	78,000	85,000
Inventories	101,500	90,000
Equipment	410,000	370,000
Accumulated depreciation	(150,000)	(158,000)
	$539,500	$465,000
Accounts payable (merchandise creditors)	$ 58,500	$ 55,000
Cash dividends payable	5,000	4,000
Common stock, $10 par	200,000	170,000
Paid-­-in capital in excess of par-­--­- common stock	62,000	60,000
Retained earnings	214,000	176,000
	$539,500	$465,000

II. The comparative balance sheet of Posner Company, for 2011 and the preceding year ended December 31, 2010, appears below in condensed form:

	Year	Year
	2011	2010
Cash	$ 53,000	$ 50,000
Accounts receivable (net)	37,000	48,000
Inventories	108,500	100,000
Investments	.....	70,000
Equipment	573,200	450,000
Accumulated depreciation-­-equipment	(142,000)	(176,000)
	$629,700	$542,000
Accounts payable	$ 62,500	$ 43,800
Bonds payable, due 2011	.....	100,000
Common stock, $10 par	325,000	285,000
Paid-­-in capital in excess of par-­--­-
common stock	80,000	55,000
Retained earnings	162,200	58,200
	$629,700	$542,000
The income statement for the current year is as follows:
Sales		$625,700
Cost of merchandise sold		340,000
Gross profit		$285,700
Operating expenses:
Depreciation expense	$26,000
Other operating expenses	68,000	94,000
Income from operations		$191,700
Other income: Gain on sale of investment	$ 4,000
Other expense:
Interest expense	6,000	(2,000)
Income before income tax		$189,700
Income tax		60,700
Net income		$129,000
Additional data for the current year are as follows:

Additional data for the current year are as follows:

(a) Fully depreciated equipment costing $60,000 was scrapped, no salvage, and equipment was purchased for $183,200.

(b) Bonds payable for $100,000 were retired by payment at their face amount.

(c) 5,000 shares of common stock were issued at $13 for cash.

(d) Cash dividends declared and paid, $25,000.

Prepare a statement of cash flows, using the indirect method of reporting cash flows from operating activities.