exercise 12-7Shown below are comparative balance sheets for Sandhill Company.Sandhill CompanyComparative Balance SheetsDecember 31Assets 2017  2016 Cash $ 211,208  $ 68,332 Accounts receivable 273,328  236,056 Inventory 518,702  587,034 Land 248,480  310,600 Equipment 807,560  621,200 Accumulated depreciation—equipment (204,996) (99,392)Total $1,854,282  $1,723,830 Liabilities and Stockholders’ Equity      Accounts payable $ 121,134  $ 133,558 Bonds payable 465,900  621,200 Common stock ($1 par) 670,896  540,444 Retained earnings 596,352  428,628 Total $1,854,282  $1,723,830 Additional information:1. Net income for 2017 was $288,858.2. Depreciation expense was $105,604.3. Cash dividends of $121,134 were declared and paid.4. Bonds payable amounting to $155,300 were redeemed for cash $155,300.5. Common stock was issued for $130,452 cash.6. No equipment was sold during 2017.7. Land was sold for its book value.Prepare a statement of cash flows for 2017 using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -45,000, or in parenthesis e.g. (45,000)).

Question
Asked May 7, 2019
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exercise 12-7

Shown below are comparative balance sheets for Sandhill Company.

Sandhill Company
Comparative Balance Sheets
December 31
Assets
 
2017
   
2016
 
Cash
 
$ 211,208
   
$ 68,332
 
Accounts receivable
 
273,328
   
236,056
 
Inventory
 
518,702
   
587,034
 
Land
 
248,480
   
310,600
 
Equipment
 
807,560
   
621,200
 
Accumulated depreciation—equipment
 
(204,996
)
 
(99,392
)
Total
 
$1,854,282
 
 
$1,723,830
 
Liabilities and Stockholders’ Equity
           
Accounts payable
 
$ 121,134
   
$ 133,558
 
Bonds payable
 
465,900
   
621,200
 
Common stock ($1 par)
 
670,896
   
540,444
 
Retained earnings
 
596,352
 
 
428,628
 
Total
 
$1,854,282
 
 
$1,723,830
 

Additional information:

1.   Net income for 2017 was $288,858.
2.   Depreciation expense was $105,604.
3.   Cash dividends of $121,134 were declared and paid.
4.   Bonds payable amounting to $155,300 were redeemed for cash $155,300.
5.   Common stock was issued for $130,452 cash.
6.   No equipment was sold during 2017.
7.   Land was sold for its book value.

Prepare a statement of cash flows for 2017 using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -45,000, or in parenthesis e.g. (45,000)). 
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Expert Answer

Step 1

Statement of cash flows: This statement reports all the cash transactions which are responsible for inflow and outflow of cash, and result of these transactions is reported as ending balance of cash at the end of reported period. Statement of cash flows includes the changes in cash balance due to operating, investing, and financing activities. Operating activities include cash inflows and outflows from business operations. Investing activities includes cash inflows and cash outflows from purchase and sale of land or equipment, or investments. Financing activities includes cash inflows and outflows from issuance of common stock and debt, payment of debt and dividends.

Step 2

Indirect method: Under indirect method, net income is reported first, and then non-cash expenses, losses from fixed assets, and changes in opening balances and ending balances of current assets are adjusted to reconcile the net income balance.

Step 3

Prepare a statement of cash flows of company San...

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