PR 16-2A Statement of cash flows—indirect method
The comparative balance sheet of Hinson Enterprises, Inc. at December 31, 2013 and 2012, is as follows
| Dec. 31, 2013 | Dec. 31, 2012 | |
| Assets | ||
| Cash | $ 128,275 | $ 157,325 |
| Accounts receivable (net) | 196,525 | 211,750 |
| Merchandise inventory | 281,400 | 261,800 |
| Prepaid expenses | 11,725 | 8,400 |
| Equipment | 573,125 | 469,875 |
| Accumulated depreciation—equipment | (149,450) | (115,675) |
| $1,041,600 | $ 993,475 | |
| Liabilities and Stockholders’ Equity | ||
| Accounts payable (merchandise creditors) | $ 218,925 | $ 207,900 |
| Mortgage note payable | 0 | 294,000 |
| Common stock, $1 par | 91,000 | 21,000 |
| Paid-in capital in excess of par—common stock | 455,000 | 280,000 |
| Retained earnings | 276,675 | 190,575 |
| $1,041,600 | $ 993,475 |
c
a. Net income, $220,500.
b. Depreciation reported on the income statement, $72,975.
c. Equipment was purchased at a cost of $142,450, and fully depreciated equipmentc osting $39,200 was discarded, with no salvage realized.
d. The mortgage note payable was not due until 2014, but the terms permitted earlier payment without penalty.
e. 7,000 shares of common stock were issued at $35 for cash.
f. Cash dividends declared and paid, $134,400.
Instructions
Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.
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