INSTRUCTIONS:
Prepare a statement of cash flows for the year ended October 31, 2011, using the indirect method of reporting cash flows from operations.
The following schedule shows the account balances of Beneficio Corporation at the beginning and end of the fiscal year ended October 31, 2011.
| Debits |
October 31, 2011 |
October 31, 2010 |
| Cash and Cash Equivalents |
$ 222,000 |
$ 50,000 |
| Investment Securities - Trading |
$ 10,000 |
$ 40,000 |
| Accounts Receivable |
$ 148,000 |
$ 100,000 |
| Inventories |
$ 291,000 |
$ 300,000 |
| Prepaid Insurance |
$ 2,500 |
$ 2,000 |
| Land and Building |
$ 195,000 |
$ 195,000 |
| Equipment |
$ 305,000 |
$ 170,000 |
| Discount on Bonds Payable |
$ 8,500 |
$ 9,000 |
| Treasury Stock (at cost) |
$ 5,000 |
$ 10,000 |
| Cost of Goods Sold |
$ 539,000 |
|
| Selling and General Expenses |
$ 287,000 |
|
| Income Taxes |
$ 35,000 |
|
| Unrealized Loss on Trading Securities |
$ 4,000 |
|
| Loss on Sale of Equipment |
$ 1,000 |
|
| Total debits |
$ 2,053,000 |
$ 876,000 |
| Credits |
October 31, 2011 |
October 31, 2010 |
| Allowance for Bad Debts |
$ 8,000 |
$ 5,000 |
| Accumulated Depreciation - Building |
$ 26,250 |
$ 22,500 |
| Accumulated Depreciation - Equipment |
$ 39,750 |
$ 27,500 |
| Accounts Payable |
$ 55,000 |
$ 60,000 |
| Notes Payable - Current |
$ 70,000 |
$ 20,000 |
| Miscellaneous Expenses Payable |
$ 18,000 |
$ 8,700 |
| Taxes Payable |
$ 35,000 |
$ 10,000 |
| Unearned Revenue |
$ 1,000 |
$ 9,000 |
| Notes Payable - Long Term |
$ 40,000 |
$ 60,000 |
| Bonds Payable - Long Term |
$ 250,000 |
$ 250,000 |
| Deferred Income Tax Liability |
$ 47,000 |
$ 53,300 |
| Common Stock $2, par |
$ 359,400 |
$ 200,000 |
| Retained Earnings Appropriated for Possible Building Expansion |
$ 43,000 |
$ 33,000 |
| Unappropriated Retained Earnings |
$ 34,600 |
$ 112,000 |
| Paid-In Capital in Excess of Par Value |
$ 116,000 |
$ 5,000 |
| Sales |
$ 898,000 |
|
| Gain on Sale of Investment Securities |
$ 12,000 |
|
| Total Credits |
$ 2,053,000 |
$ 876,000 |
The following information was also available:
a) All purchases and sales were on account
b) Equipment with an original cost of $15,000 was sold for $7,000
c) Selling and general expenses include the following:
Building Depreciation $3,750
Equipment depreciation $25,250
Bad Debt Expense $4,000
Interest Expense $18,000
d) A 6-month note payable for $50,000 was issued toward the purchase of new equipment.
e) The long term note payable requires the payment of $20,000 per year plus interest until paid.
f) Treasury stock was sold for $1,000 more than its cost.
g) During the year, a 30% stock dividend was declared and issued. At the time, there were 100,000 shares of $2 par common stock outstanding. However, 1,000 of these shares were held as treasury stock at the time and were prohibited from participating in the stock dividend. Market price was $10 per share afte rthe stock dividend was issued.
h) Equipment was overhauled, extending its useful life at a cost of $6,000. The cost was debited to Accumulated Depreciation - Equipment.
i) Beneficio has determined that its purchases and sales of trading securities are operating activities.