Problem - SCF-Indirect Method
The comparative balance sheets for Hinckley Corporation show the following information.
December
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 food. 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.