Following are comparative balance sheets for Hardiplank Siding, Inc.:
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Hardiplank Siding, Inc. |
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Comparative Balance Sheets 2011 December 31, and 2010 |
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Assets |
2011 |
2010 |
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Cash |
$ 80,000 |
$ 57,500 |
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Accounts receivable, net |
60,000 |
45,000 |
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Merchandise inventory |
90,000 |
52,500 |
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Land |
67,500 |
60,000 |
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Buildings |
90,000 |
90,000 |
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Accumulated depreciation buildings |
-30,000 |
27,000) |
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Equipment |
2,85,000 |
2,25,000 |
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Accumulated depreciation – |
-52,500 |
48,000) |
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equipment |
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Goodwill |
1,20,000 |
1,50,000 |
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Total assets |
$710,000$ |
710,000$605,000 |
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Liabilities and stockholders” equity |
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Accounts payable |
$ 95,000 |
$ 65,000 |
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Accrued liabilities payable |
30,000 |
22,500 |
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Capital stock |
3,15,000 |
3,00,000 |
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Paid-in capital – stock dividends |
75,000 |
67,500 |
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Paid-in capital – land donations |
15,000 |
0- |
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Retained earnings |
1,80,000 |
1,50,000 |
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Total liabilities and stockholders” |
$710,000$ |
710,000$605,000 |
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equity |
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An analysis of the Retained Earnings account for the year reveals the following:
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Balance, 2011 January 1 |
$150,000 |
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Add: Net income for the year |
1,07,500 |
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Less: cash dividends |
$55,000 |
$257,500 |
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Stock dividends |
22,500 |
77,500 |
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Balance, 2011 December 31 |
$180,000 |
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a. Equipment with a cost of USD 30,000 on which USD 27,000 of depreciation had been accumulated was sold during the year at a loss of USD 1,500. Included in net income is a gain on the sale of land of USD 9,000.
b. The president of the company has set two goals for 2012: (1) increase cash by USD 40,000 and (2) increase cash dividends by USD 35,000. The company”s activities in 2012 are expected to be quite similar to those of 2011, and no new fixed assets will be acquired.
Prepare a schedule showing cash flows from operating activities under the indirect method for 2011. Can the company meet its president”s goals for 2012? Explain.