EX 16-17 Statement of cash flows—indirect method
The comparative balance sheet of Hobson Medical Equipment Inc. for December 31, 2013 and 2012, is as follows:
| Dec. 31, 2013 | Dec. 31, 2012 | |
| Assets | ||
| $294 | $96 | |
| Accounts receivable (net) | 168 | 120 |
| Inventories | 105 | 66 |
| Land | 240 | 270 |
| Equipment | 135 | 105 |
| Accumulated depreciation—equipment | (36) | (18) |
| Total | $906 | $639 |
| Liabilities and Stockholders’ Equity | ||
| Accounts payable (merchandise creditors) | $105 | $96 |
| Dividends payable | 18 | — |
| Common stock, $10 par | 60 | 30 |
| Paid-in capital in excess of par—common stock | 150 | 75 |
| Retained earnings | 573 | 438 |
| Total | $906 | $639 |
The following additional information is taken from the records:
a. Land was sold for $75.
b. Equipment was acquired for cash.
c. There were no disposals of equipment during the year.
d. The common stock was issued for cash.
e. There was a $195 credit to Retained Earnings for net income.
f. There was a $60 debit to Retained Earnings for cash dividends declared. Respond to the following:
a. Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.
b. Was Hobson Medical Equipment’s cash flow from operations more or less than net income? What is the source of this difference?
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