Question Details

The three accounts shown below appear in the general ledger 



1
Wayne Company reported net income of $265,000  for 2014. Wayne also reported depreciation expense of $45,000 and a loss of $8,000 on the sale of equipment. The comparative balance sheet shows a decrease in accounts receivable of $15,000 for the year, a $17,000 increase in accounts payable, and a $6,000 decrease in prepaid expenses.

Instructions
Prepare the operating activities section of the statement of cash flows for 2014. Use the indirect method.


2

The three accounts shown below appear in the general ledger of Larson Corp. during 2014.

	Equipment	
Date	Debit	Credit	Balance
Jan.	1	Balance		160,000
July 	31	Purchase of equipment	75,000	235,000
Sept.	2	Cost of equipment constructed	56,000	291,000
Nov.	10	Cost of equipment sold		45,000	246,000

	Accumulated Depreciation—Equipment	
Date	Debit	Credit	Balance
Jan.	1	Balance			71,000
Nov. 	10	Accumulated depreciation on
	        equipment sold	30,000		41,000
Dec.	31	Depreciation for year		20,000	61,000
 
	Retained Equipment	
Date	Debit	Credit	Balance
Jan.	1	Balance			105,000
Aug.	23	Dividends (cash)	15,000		90,000
Dec.	31	Net income		50,000	140,000

Instructions
From the postings in the accounts, indicate how the information is reported on a statement of cash flows using the indirect method. The loss on sale of equipment was $7,000. (Hint: Cost of equipment constructed is reported in the investing activities section as a decrease in cash of $58,000.)



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