1. Use the information below and on page 777 to prepare a statement of cash flows using the indirect method.
Reynolds Company
Comparative Balance Sheets
December 31
| Change | |||
| Assets | 2012 | 2011 | Increase/Decrease |
| Cash | $ 54,000 | $ 37,000 | $ 17,000 Increase |
| Accounts receivable | 68,000 | 26,000 | 42,000 Increase |
| Inventory | 54,000 | –0– | 54,000 Increase |
| Prepaid expenses | 4,000 | 6,000 | 2,000 Decrease |
| Land | 45,000 | 70,000 | 25,000 Decrease |
| Buildings | 200,000 | 200,000 | –0– |
| Accumulated depreciation—buildings | (21,000) | (11,000) | 10,000 Increase |
| Equipment | 193,000 | 68,000 | 125,000 Increase |
| Accumulated depreciation—equipment | (28,000) | (10,000) | 18,000 Increase |
| Totals | $569,000 | $386,000 |
Liabilities and Stockholders’ Equity
| Accounts payable | $ 23,000 | $ 40,000 | $ 17,000 Decrease |
| Accrued expenses payable | 10,000 | 0 | 10,000 Increase |
| Bonds payable | 110,000 | 150,000 | 40,000 Decrease |
| Common stock ($1 par) | 220,000 | 60,000 | 160,000 Increase |
| Retained earnings | 206,000 | 136,000 | 70,000 Increase |
| Totals | $569,000 | $386,000 |
Reynolds Company
Income Statement
For the Year Ended December 31, 2012
| Sales revenue | $890,000 | |
| Cost of goods sold | $465,000 | |
| Operating expenses | 221,000 | |
| Interest expense | 12,000 | |
| Loss on sale of equipment | 2,000 | 700,000 |
| Income before income taxes | 190,000 | |
| Income tax expense | 65,000 | |
| Net income | $125,000 |
Additional information:
1. Operating expenses include depreciation expense of $33,000 and charges from prepaid expenses of $2,000.
2. Land was sold at its book value for cash.
3. Cash dividends of $55,000 were declared and paid in 2012.
4. Interest expense of $12,000 was paid in cash.
5. Equipment with a cost of $166,000 was purchased for cash. Equipment with a cost of $41,000 and a book value of $36,000 was sold for $34,000 cash.
6. Bonds of $10,000 were redeemed at their face value for cash. Bonds of $30,000 were converted into common stock.
7. Common stock ($1 par) of $130,000 was issued for cash.
8. Accounts payable pertain to merchandise suppliers.
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