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
|
|
Totals
|
$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
|
|
Totals
|
$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 of 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.