I need help with a solution in the Cornerstones of Financial and Managerial Accounting textbook, Chapter 11, problem 11-51B on page 578. I need to create a statement of cash flows using the indirect method for Fleet Limousine. Please help with this!!!
On December 31, 2012, Dow Steel Corporation had 780,000 shares of common stock and 48,000 shares of 10%, noncumulative, nonconvertible preferred stock issued and outstanding. Dow issued a 5% common stock dividend on May 15 and paid cash dividends of $580,000 and $87,000 to common and preferred shareholders, respectively, on December 15, 2013.
On February 28, 2013, Dow sold 68,000 common shares. Also, as a part of a 2012 agreement for the acquisition of Merrill Cable Company, another 24,000 shares (already adjusted for the stock dividend) are to be issued to former Merrill shareholders on December 31, 2014, if Merrill's 2014 net income is at least $680,000. In 2013, Merrill's net income was $810,000.
In keeping with its long-term share repurchase plan, 5,000 shares were retired on July 1. Dow's net income for the year ended December 31, 2013, was $3,000,000. The income tax rate is 40%.
As part of an incentive compensation plan, Dow granted incentive stock options to division managers at December 31 of the current and each of the previous two years. Each option permits its holder to buy one share of common stock at an exercise price equal to market value at the date of grant and can be exercised one year from that date. Information concerning the number of options granted and common share prices follows: