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Question
Condensed comparative balance sheets of Posner Company at December 31, Years 1 and 2, appear as follows:
| Year 2 | Year 1 | |
| Cash | $ 53,000 | $ 50,000 |
| Accounts receivable (net) | 37,000 | 48,000 |
| Inventories | 108,500 | 100,000 |
| Investments | — | 70,000 |
| Equipment | 573,200 | 450,000 |
| Accumulated depreciation—equipment | (142,000) | (176,000) |
| Total assets | $ 629,700 | $ 542,000 |
| Accounts payable | $ 62,500 | $ 43,800 |
| Bonds payable, due Year 2 | — | 100,000 |
| Common stock, $10 par | 335,000 | 285,000 |
| Paid-in capital in excess of par | 70,000 | 55,000 |
| Retained earnings | 162,200 | 58,200 |
| Total liabilities and stockholders’ equity | $ 629,700 | $ 542,000 |
The income statement for the current year is as follows:
| Sales | $625,700 | |
| Cost of merchandise sold | 340,000 | |
| Gross profit | $285,700 | |
| Operating expenses: | ||
| Depreciation expense | $26,000 | |
| Other operating expenses | 68,000 | 94,000 |
| Income from operations | $191,700 | |
| Other revenue and expense: | ||
| Gain on sale of investment | $ 4,000 | |
| Interest expense | (6,000) | (2,000) |
| Income before income tax | $189,700 | |
| Income tax expense | 60,700 | |
| Net income | $129,000 |
Additional data for the current year are as follows:
- Fully depreciated equipment costing $60,000 was scrapped, no salvage, and new equipment was purchased for $183,200.
- Bonds payable for $100,000 were retired by payment at their face amount.
- 5,000 shares of common stock were issued at $13 for cash.
- Cash dividends declared and paid, $25,000.
Prepare a statement of cash flows for the year ended December 31, Year 2, using the indirect method.
Answer
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