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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Balance sheets for Brierwold Corporation follow:

Chapter 14, Problem 52P, Balance sheets for Brierwold Corporation follow: Additional transactions were as follows: a.

 Additional transactions were as follows:

  1. a. Purchased equipment costing $50,000.
  2. b. Sold equipment costing $60,000, with a book value of $25,000, for $40,000.
  3. c. Retired preferred stock at a cost of $110,000. (The premium is debited to Retained Earnings.)
  4. d. Issued 10,000 shares of common stock (par value, $4) for $10 per share.
  5. e. Reported a loss of $15,000 for the year.
  6. f. Purchased land for $50,000.

 Required:

Prepare a statement of cash flows using the indirect method.

To determine

Chart the statement of cash flows using the indirect method.

Explanation

Cash Flow Statement:

Cash flow statement is a financial statement prepared to provide information about the sources and uses of cash in a firm. In this statement, the activities increasing cash are referred as cash inflows and the activities that decrease cash are referred as cash outflows.

The statement of cash flows for B Corporation using indirect method is shown below:

B Corporation
Statement of Cash Flows
For the year ending
 Amount ($)Amount ($)
Cash flows from operating activities:
Net loss(15,000) 
Add/Deduct:  
    Decrease in accounts receivable1(18,000) 
    Increase in inventory2(10,000) 
    Decrease in accounts payable3(50,000) 
    Depreciation expense480,000 
    Gain on sale of equipment(15,000) 
         Net cash from operating activities 10,000
Cash flows from investing activities:
    Sale of equipment40,000 
    Purchase of equipment(50,000) 
    Purchase of land(50,000) 
         Net cash from investing activities (60,000)
Cash flows from financing activities:
    Retirement of preferred stock(110,000) 
    Issuance of common stock100,000 
    Receipt of mortgage110,000 
         Net cash from financing activities 100,000
Net increase in cash 50,000

Table (1)

Working Note:

1.

Calculation of difference in accounts receivable:

(DifferenceinAccountsReceivable)=(EndingAccountsReceivableBeginningAccountsReceivable)=($180,000$200,000)=$20,000

2

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