Financial Accounting: An Integrated Statements Approach, 2nd Edition

Chapter 13 Statement of Cash Flows 615

COMMON STOCK

Jan. 1 Balance 50,000

Dec. 7 Issued 10,000 shares

of common stock for

$16 per share 10,000

Dec. 31 Balance 60,000

PAID-IN CAPITAL IN EXCESS OF PAR

Jan. 1 Balance 200,000

Dec. 7 Issued 10,000 shares

of common stock for

$16 per share 150,000

Dec. 31 Balance 350,000

RETAINED EARNINGS

Dec. 31 Net loss 43,800 Jan. 1 Balance 1,263,300

Dec. 31 Cash dividends 12,000

Dec. 31 Balance 1,207,500

Instructions

Prepare a statement of cash flows, using the indirect method of presenting cash flows from

operating activities.

The comparative balance sheet of Village Markets, Inc., for December 31, 2007 and 2006, is as

follows:

Dec. 31, 2007 Dec. 31, 2006

Assets

Cash $ 421,900 $ 456,700

Accounts receivable (net) 397,200 365,700

Inventories 658,900 623,100

Investments — 175,000

Land 230,000 —

Equipment 590,000 450,000

Accumulated depreciation (282,100) (234,500)

Total $2,015,900 $1,836,000

Liabilities and Stockholders’ Equity

Accounts payable (merchandise creditors) $ 471,200 $ 456,300

Accrued expenses (operating expenses) 40,000 45,300

Dividends payable 61,000 58,000

Common stock, $1 par 23,000 20,000

Paid-in capital in excess of par—common stock 195,000 120,000

Retained earnings 1,225,700 1,136,400

Total $2,015,900 $1,836,000

The income statement for the year ended December 31, 2007, is as follows:

Sales $4,367,800

Cost of merchandise sold 2,532,000

Gross profit $1,835,800

Operating expenses:

Depreciation expense $ 47,600

Other operating expenses 1,257,900

Total operating expenses 1,305,500

(continued)

Problem 13-4A

Statement of cash flows—
direct method

Goal 3

Net cash flow from
operating activities, $345,200