The Comparative Balance Sheets of Posner Company,for Years 1 and 2

question 92

Essay

The comparative balance sheets of Posner Company,for Years 1 and 2 ended December 31,appear below in condensed form:
$\begin{array}{lrr}&\text { Year 2 }&\text { Year1 }\\\text { Cash } & \$ \overline{53,000} & \$ \overline{50,000} \\\text { Accounts receivable net } & 37,000 & 48,000 \\\text { Inventories } & 108,500 & 100,000 \\\text { Investments } & - & 70,000 \\\text { Equipment } & 573,200 & 450,000 \\\text { Accumulated depreciation —equipment } & \underline {142,000} &\underline { 176,000} \\&\underline {\$ 629.700}&\underline { \$ 542,000 }\\\\\text { Accounts payable } & \$ 62,500 & \$ 43,800 \\\text { Bonds payable, due Year 2 } & - & 100,000 \\\text { Common stock, \$10 par } & 325,000 & 285,000 \\\text { Paid-in capital in excess of par-common stock } & 80,000 & 55,000 \\\text { Retained earnings } & \underline {162,200 }& \underline {58,200}\\&\underline { \$ 629.700 }&\underline { \$ 542,000 }\\\\\text { The income statement for the current year is as follows: }\\\\\text { Sales } & & \$ 625,700 \\\text { Cost of merchandise sold } & & \underline {340,000 }\\\text { Gross profit } & & \$ 285,700 \\\text { Operating expenses: } \\\text { Depreciation expense } & \$ 26,000 & \\\text { Other operating expenses } &\underline { 68,000} & \underline {94,000} \\\text {Income from operations} & &\$ 191,700\ \\\text {Other income:} & \\\text {Gain on sale of investment} & \$4,000\\\text {Other expense:} & \\\text {Interest expense} &\underline { 6,000 } &\underline { 2,000 } \\\text {Income before income tax} & &\$ 189,700 \\\text {Income tax} & &\underline { 60,700 } \\\text {Net income} & &\underline { \$ 129000 } \\\end{array}$ Additional data for the current year are as follows:
a. Fully depreciated equipment costing $60,000 was scrapped,no salvage,and new equipment was purchased for $183,200.
b. Bonds payable for $100,000 were retired by payment at their face amount.
c. 5,000 shares of common stock were issued at $13 for cash.
d. Cash dividends declared and paid,$25,000.
Prepare a statement of cash flow,using the indirect method of reporting cash flows from operating activities.

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