1. When a spreadsheet for a statement of cash flows is prepared, all changes in noncash balance sheet accounts are fully explained on the spreadsheet. Explain how these noncash balance sheet accounts are used to fully account for cash flows on a spreadsheet.
2. Use the following financial statements and additional information to (1) prepare a statement of cash flows for the year ended December 31, 2012, using the indirect method, and (2) analyze and briefly discuss the statement prepared in part 1 with special attention to operating activities and to the company’s cash level.
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KRUG ING. Comparative Balance Sheets December 31,2012 and 2011 |
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|
2012 |
2011 |
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Assets |
|
|
|
Cash |
$ 26,400 |
$ 30,550 |
|
Accounts receivable, net |
14,050 |
12,150 |
|
Inventory |
90,100 |
70,150 |
|
Equipment |
49,900 |
44,500 |
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Accumdepreciation—Equipment |
(22,500) |
(18,300) |
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Total assets |
$157,950 |
$139,050 |
|
Liabilities and Equity |
|
|
|
Accounts payable |
$ 23,350 |
$ 25,400 |
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Salaries payable |
1,050 |
600 |
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Common stock, no par value |
107,000 |
100,000 |
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Retained earnings |
26,550 |
13,050 |
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Total liabilities and equity |
$157,950 |
$139,050 |
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KRUG INC. Income Statement For Year Ended December 31,2012 |
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Sales |
|
$47,575 |
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Cost of goods sold |
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(17,950) |
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Gross profit |
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29,625 |
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Operating expenses |
|
|
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Depreciation expense |
$4,200 |
|
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Other expenses |
8,550 |
|
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Total operating expense |
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12,750 |
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Income before taxes |
|
16,875 |
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Income tax expense |
|
3,375 |
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Net income |
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$13,500 |
Additional Information
a. No dividends are declared or paid in 2012.
b. Issued additional stock for $7,000 cash in 2012.
c. Purchased equipment for cash in 2012; no equipment was sold in 2012.