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Question
Condensed comparative balance sheets of Garrett Company at December 31, Years 1 and 2, are as follows:
| Year 2 | Year 1 | |
| Cash | $ 90,000 | $ 78,000 |
| Accounts receivable (net) | 78,000 | 85,000 |
| Inventories | 106,500 | 90,000 |
| Equipment | 410,000 | 370,000 |
| Accumulated depreciation | (150,000) | (158,000) |
| Total assets | $ 534,500 | $ 465,000 |
| Accounts payable (merchandise creditors) | $ 53,500 | $ 55,000 |
| Cash dividends payable | 5,000 | 4,000 |
| Common stock, $10 par | 200,000 | 170,000 |
| Paid-in capital in excess of par | 62,000 | 60,000 |
| Retained earnings | 214,000 | 176,000 |
| Total liabilities and stockholders’ equity | $534,500 | $465,000 |
In addition, assume that equipment costing $125,000 was purchased for cash, and equipment costing $85,000 with accumulated depreciation of $65,000 was sold for $15,000; that the stock was issued for cash; and that the only entries in the retained earnings account were for net income of $56,000 and cash dividends declared of $18,000.
Prepare a statement of cash flows for the year ended December 31, Year 2, using the indirect method.
Answer
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