Preparing the statement of cash flows—indirect method with noncash transactions
The 2012 comparative balance sheet and income statement of All Wired, Inc., follow:
| ALL WIRED, INC. Comparative Balance Sheet December 31, 2012 and 2011 | |||
| 2012 | 2011 | Increase (Decrease) | |
| Current assets: | |||
| Cash and cash equivalents | $ 26,700 | $ 15,600 | $ 11,100 |
| Accounts receivable | 26,500 | 25,300 | 1,200 |
| Inventories | 79,900 | 91,900 | (12,000) |
| Plant assets: | |||
| Land | 35,500 | 11,000 | 24,500 |
| Equipment, net | 102,900 | 90,700 | 12,200 |
| Total assets | $ 271,500 | $ 234,500 | $ 37,000 |
| Current liabilities: | |||
| Accounts payable | $ 35,600 | $ 30,500 | $ 5,100 |
| Accrued liabilities | 28,900 | 30,600 | (1,700) |
| Long-term liabilities: | |||
| Notes payable | 77,000 | 103,000 | (26,000) |
| Stockholders’ equity: | |||
| Common stock | 88,200 | 64,300 | 23,900 |
| Retained earnings | 41,800 | 6,100 | 35,700 |
| Total liabilities and stockholders’ equity | $ 271,500 | $ 234,500 | $ 37,000 |
| ALL WIRED, INC. Income Statement Year Ended December 31, 2012 | ||
| Revenues: | ||
| Sales revenue | $ 438,000 | |
| Interest revenue | 8,500 | |
| Total revenues | 446,500 | |
| Expenses: | ||
| Cost of goods sold | $ 209,200 | |
| Salary expense | 72,400 | |
| Depreciation expense | 14,500 | |
| Other operating expense | 10,000 | |
| Interest expense | 21,500 | |
| Income tax expense | 19,400 | |
| Total expenses | 347,000 | |
| Net income | $ 99,500 | |
Additionally, All Wired purchased land of $24,500 by financing it 100% with longterm notes payable during 2012. During the year, there were no sales of land or equipment, no additional issuances of notes payable, no retirements of stock, and no treasury stock transactions.
Requirements
1. Prepare the 2012 statement of cash flows, formatting operating activities by the indirect method.
2. How will what you learned in this problem help you evaluate an investment?
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