An analysis of the income statement and the balance sheet accounts of Headrick, Inc., at December 31, 2009, provides the following information.
Income Statement Items:
Gain on sale of Marketable Securities$ 42,000
Loss on Sales of Plant Assets 33,000
Analysis of balance sheet accounts:
Marketable Securities Account:
Debit Entries$ 75,000
Credit Entries 90,000
Notes Receivable Account:
Debit Entries 210,000
Credit Entries 162,000
Plant and Equipment Accounts:
Debit entries to plant asset accounts 196,000
Credit entries to plant asset accounts 120,000
Debit entries to accumulated depreciation accounts 75,000
Additional Info:
1.Except as noted in 4 below, payments and proceeds relating to investing transactions were made in cash.
2.The marketable securities are not cash equivalents
3.All notes receivable relate to cash loans made to borrowers, not to receivables from customers.
4.Purchases of new equipment during the year ($196,000) were financed by paying $60,000 in cash and issuing a long-term note payable for $136,000.
5.Debits to the accumulated depreciation accounts are made whenever depreciable plant assets are retired. Thus the book value of plant assets retired during the year was $45,000 ($120,000-$75,000)
Instructions:
a.Prepare the investing activities section of a statement of cash flows. Show supporting computations for the amounts of (1) proceeds from sales of marketable securities and (2) proceeds from sales of plant assets. Place brackets around numbers representing cash outflows.
b.Prepare the supporting schedule that should accompany the statement of cash flows in order to disclose the noncash aspects of the companys investing and financing activities.
c.Assume that Headricks management expects approximately the same amount of cash to be used for investing activities next year. In general terms, explain how the company might generate cash for this purpose.