Reference no: EM131781736
Problem - The comparative balance sheets for Hinckley Corporation show the following information.
December 31 2010 2009
Cash $ 33,500 $ 13,000
Accounts receivable 12,250 10,000
Inventory 12,000 9,000
Investments - 0- 3,000
Building - 0- 29,750
Equipment 45,000 20,000
Patent 5,000 6,250
$ 107,750 $ 91,000
Allowance for doubtful accounts $ 3,000 $ 4,500
Accumulated depreciation on equipment 2,000 4,500
Accumulated depreciation on building - 0- 6,000
Accounts payable 5,000 3,000
Dividends payable - 0- 5,000
Notes payable, short- term (nontrade) 3,000 4,000
Long- term notes payable 31,000 25,000
Common stock 43,000 33,000
Retained earnings 20,750 6,000
$ 107,750 $ 91,000
Additional data related to 2010 are as follows.
1. Equipment that had cost $ 11,000 and was 40% depreciated at time of disposal was sold for $ 2,500.
2. $ 10,000 of the long- term note payable was paid by issuing common stock.
3. Cash dividends paid were $ 5,000.
4. On January 1, 2010, the building was completely destroyed by a flood. Insurance proceeds on the building were $ 30,000 (net of $ 2,000 taxes).
5. Investments (available- for- sale) were sold at $ 1,700 above their cost. The company has made similar sales and investments in the past.
6. Cash was paid for the acquisition of equipment.
7. A long- term note for $ 16,000 was issued for the acquisition of equipment.
8. Interest of $ 2,000 and income taxes of $ 6,500 were paid in cash.
Instructions - Prepare a statement of cash flows using the indirect method. Flood damage is unusual and infrequent in that part of the country.