The Adams Corporation reported the following income statement and comparative balance sheet for 2014 and 2013, along with transaction data for 2014:
|
ADAMS CORPORATION Income Statement Year Ended December 31, 2014
|
||
|
Sales revenue |
|
$662,000 |
|
Cost of goods sold |
|
560,000 |
|
Gross profit |
|
$102,000 |
|
Operating expenses: |
|
|
|
Salary expense |
$46,000 |
|
|
Depreciation expense |
10,000 |
|
|
Rent expense |
2,000 |
58,000 |
|
Total operating expenses |
|
|
|
Income from operations |
|
$ 44,000 |
|
Other items: |
|
|
|
Loss on sale of equipment |
|
(2,000) |
|
Income before income tax |
|
$ 42,000 |
|
Income tax expense |
|
(16,000) |
|
Net income |
|
$ 26,000 |
|
ADAMS CORPORATION |
|||||
|
2014 |
2013 |
Liabilities |
2014 |
2013 |
|
|
Assets |
Current: |
||||
|
Current: |
Accounts payable |
$ 35,000 |
$ 26,000 |
||
|
Cash and cash equivalents |
$ 22,000 |
$ 3,000 |
Accrued liabilities |
7,000 |
9,000 |
|
Accounts receivable |
22,000 |
23,000 |
Income tax payable |
10,000 |
10,000 |
|
Inventory |
35,000 |
34,000 |
Total current liabilities |
$ 52,000 |
$ 45,000 |
|
Total current assets |
$ 79,000 |
$ 60,000 |
Bonds payable |
84,000 |
53,000 |
|
Equipment, net |
126,000 |
72,000 |
Stockholders’ Equity |
|
|
|
Common stock |
52,000 |
20,000 |
|||
|
Retained earnings |
27,000 |
19,000 |
|||
|
Treasury stock |
(10,000) |
(5,000) |
|||
|
Total assets |
$205,000 |
$132,000 |
Total liabilities and stockholders’ equity |
$205,000 |
$132,000 |
|
Transaction Data for 2014: |
|
|
Purchase of equipment |
$140,000 |
|
Payment of dividends |
18,000 |
|
Issuance of common stock to retire bonds payable |
13,000 |
|
Issuance of bonds payable to borrow cash |
44,000 |
|
Cash receipt from issuance of common stock |
19,000 |
|
Cash receipt from sale of equipment (book value, $76,000) |
74,000 |
|
Purchase of treasury stock |
5,000 |
Requirement
1. Prepare Adams Corporation’s statement of cash flows for the year ended December 31, 2014. Format operating cash flows by the indirect method. Follow the four steps outlined below.
STEP 1. Lay out the format of the statement of cash flows.
STEP 2. From the comparative balance sheet, compute the change in cash during the year.
STEP 3. From the income statement, take net income, depreciation, and the loss on sale of equipment to the statement of cash flows.
STEP 4. Complete the statement of cash flows. Account for the year-to-year change in each balance sheet account. Prepare a T-account to show the transaction activity in each long-term balance-sheet account.