Avatar Company Uses the Indirect Method to Prepare Its Statement

question 80

Essay

Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following sections of the comparative balance sheet:
$$\begin{array} { | l | r | r | r | } \hline &{ \mathbf { 2 0 1 4 } } & { \mathbf { 2 0 1 3 } } & { \text { Increase/decrease } } \\\hline \text { Accounts payable } & \$ 4,000 & \$ 6,000 & \$ ( 2,000 ) \\\hline \text { Accrued liabilities } & 2,000 & 1,000 & 1,000 \\\hline \text { Long-term notes payable } & 84,000 & 90,000 & ( 6,000 ) \\\hline \text { Total liabilities } & \$ 90,000 & \$ 97,000 & \$ ( 7,000 ) \\\hline & & &\\\hline \text { Common stock } & 30,000 & 2,000 & 28,000 \\\hline\text { Retained earnings } & 113,000 & 74,000 & 39,000 \\\hline \text { Treasury stock } & (8,000 )& (5,000) & (3,000) \\\hline \text { Total equity } & \$ 135,000 & \$ 71,000 & \$ 64,000\\\hline\\\hline\text { Total liabilities and equity }&\$225,000&\$168,000&\$57,000\\\hline\end{array}$$

Additional information:
• No stock was retired.
• No treasury stock was sold.
• During 2014, the company repaid $40,000 of long-term notes payable.
• During 2014, the company borrowed $34,000 on a new note payable.
• Net income for the year was $49,000.
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Please prepare the financing section of the statement of cash flows using the following format:
$\begin{array}{|l|l|l|}\hline\text { Financing activities: } &\quad\quad&\quad\quad \\\hline & \\\hline & \\\hline & \\\hline & \\\hline & \\\hline \text { Net cash from financing activities } &\\\hline\end{array}$

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Definitions:

Compounded Semi-Annually

Interest on an investment is calculated and added to the principal every six months, with future interest then calculated on the new total.

Fair Market Value

The price at which an asset would change hands between a willing buyer and a willing seller, both having reasonable knowledge of all the relevant facts.

Provincial Bonds

Provincial bonds are debt securities issued by a provincial government in Canada to finance its expenditures and obligations.

Ordinary Annuity

A series of equal payments made at equal intervals of time, such as monthly or annually.