On the basis of the following data for Larson Co. for 2010 and the preceding year ended December 31, 2010, prepare a statement of cash flows. Use the indirect method of reporting cash flows from operating activities. Assume that equipment costing $125,000 was purchased for cash and equipment costing $85,000 with accumulated depreciation of $65,000 was sold for $15,000; that the stock was issued for cash; and that the only entries in the retained earnings account were net income of $51,000 and cash dividends declared of $13,000.
Year Year
2010 2009
Cash $100,000 $ 78,000
Accounts receivable (net) 78,000 85,000
Inventories 101,500 90,000
Equipment 410,000 370,000
Accumulated depreciation (150,000) (158,000)
$539,500 $465,000
Accounts payable (merchandise creditors) $ 58,500 $ 55,000
Cash dividends payable 5,000 4,000
Common stock, $10 par 200,000 170,000
Paid-in capital in excess of par--
common stock 62,000 60,000
Retained earnings 214,000 176,000
$539,500 $465,000