STATEMENT OF CASH FLOWS

PROBLEM 23-2

HINCKLEY CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2010

Cash flows from operating activities

Net income $14,750 (a)

Adjustments to reconcile net income

to net cash provided by operating activities:

Loss on sale of equipment $ 4,100 (b)

Gain from flood damage (8,250)*

Depreciation expense 1,900 (c)

Patent amortization 1,250

Gain on sale of investments (1,700)

Increase in accounts receivable (net) (3,750)**

Increase in inventory (3,000)

Increase in accounts payable 2,000 (7,450)

Net cash provided by operating activities 7,300

Cash flows from investing activities

Sale of investments 4,700

Sale of equipment 2,500

 Purchase of equipment (20,000) (d)

Proceeds from flood damage to building 32,000

Net cash provided by investing activities 19,200

Cash flows from financing activities

Payment of dividends (5,000)

Payment of short-term note payable (1,000)

Net cash used by financing activities (6,000)

Increase in cash 20,500

Cash, January 1, 2010 13,000

Cash, December 31, 2010 $33,500

*[$ 32,000 – ($ 29,750 – $ 6,000)]

**($12,250 – $ 3,000) – ($ 10,000 – $ 4,500)

Supplemental disclosures of cash flow information:

Cash paid during the year for:

Interest $2,000

Income taxes: $6,500

Non-cash investing and financing activities*

Retired note payable by issuing ordinary shares $10,000

Purchased equipment by issuing note payable 16,000

 $26,000

*Presented in the notes to the financial statements.

Supporting Computations:

a) Ending retained earnings $20,750

Beginning retained earnings (6,000)

Net income $14,750

b) Cost $11,000

Accumulated depreciation (40% X $11,000) (4,400)

Book value $6,600

Proceeds from sale (2,500)

Loss on sale $ 4,100

c) Accumulated depreciation on equipment sold $ 4,400

Decrease in accumulated depreciation (2,500)

Depreciation expense $1,900

d) Beginning equipment balance $20,000

Cost of equipment sold (11,000)

Remaining balance 9,000

Purchase of equipment with note 16,000

Adjusted balance 25,000

Ending equipment balance (45,000)

Purchased with cash $20,000

PROBLEM 23-3
 MORTONSON COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2010
($000 Omitted

Cash flows from operating activities

Cash receipts from customers $3,520 (a)
Cash payments:
Payments for merchandise $1,270 (b)
Salaries and benefits 725
Heat, light, and power 75
Property taxes 19
Interest 30
Miscellaneous 10
Income taxes 808 (c) 2,937
Net cash provided by operating activities 583

Cash flows from investing activities

Sale of non-trading equity investments 40
Purchase of buildings and equipment (310)
Purchase of land (80)
Net cash used by investing activities (350)

Increase in cash 233

Cash, January 1, 2010 100

Cash, December 31, 2010 $333

a) Sales $3.800
Deduct ending accounts receivable 780
3.020
Add beginning accounts receivable 500
Cash receipts (collections from customers) $3.520

b) Cost of goods sold $1.200

Add ending inventory 720
 Goods available for sale 1.920
Deduct beginning inventory 560
Purchases 1.360
Deduct ending accounts payable 420
940
Add beginning accounts payable 330
Cash purchases (payments for merchandise) $1.270

c) Income taxes $818

Deduct ending income taxes payable 40
778
Add beginning income taxes payable 30
Income taxes paid $808