Financial Accounting: An Integrated Statements Approach, 2nd Edition

620 Chapter 13 Statement of Cash Flows

PAID-IN CAPITAL IN EXCESS OF PAR

Jan. 1 Balance 120,000

Dec. 7 Issued 2,000 shares of

common stock for

$41 per share 80,000

Dec. 31 Balance 200,000

RETAINED EARNINGS

Dec. 31 Cash dividends 15,000 Jan. 1 Balance 310,200

Dec. 31 Net income 72,800

Dec. 31 Balance 368,000

Instructions

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

erating activities.

The comparative balance sheet of Heaven’s Bounty Nursery Inc. for December 31, 2006 and 2007,

is as follows:

Dec. 31, 2007 Dec. 31, 2006

Assets

Cash $ 134,200 $154,300

Accounts receivable (net) 203,200 189,700

Inventories 267,900 243,700

Investments — 110,000

Land 140,000 —

Equipment 290,000 210,000

Accumulated depreciation (112,300) (93,400)

Total $ 923,000 $814,300

Liabilities and Stockholders’ Equity

Accounts payable (merchandise creditors) $ 192,100 $175,400

Accrued expenses (operating expenses) 12,400 14,600

Dividends payable 32,100 30,400

Common stock, $1 par 10,000 8,000

Paid-in capital in excess of par—common stock 180,000 100,000

Retained earnings 496,400 485,900

Total $ 923,000 $814,300

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

Sales $965,000

Cost of merchandise sold 503,200

Gross profit $461,800

Operating expenses:

Depreciation expense $ 18,900

Other operating expenses 258,300

Total operating expenses 277,200

Operating income $184,600

Other income:

Gain on sale of investments 22,000

Income before income tax $206,600

Income tax expense 69,400

Net income $137,200

Alternate Problem

13-4B

Statement of cash flows—

direct method

Goal 3

Net cash flow from

operating activities, $110,900