On the basis of the following data for Branch Co. for the year ended December 31, 2011 and the preceding year, prepare a statement of cash flows using the indirect method of reporting cash flows from operating activities.
Assume that equipment costing $125,000 was purchased for cash and the land was sold for $15,000. The stock was issued for cash and the only entries in the retained earnings account were net income of $56,000 and cash dividends declared and paid of $18,000.
Definitions:
Fixed Manufacturing Overhead
Costs associated with manufacturing that do not vary with the level of production, such as rent, salaries of supervisors, and depreciation of factory equipment.
Variable Costing
An accounting method that includes only variable production costs--such as materials, labor, and overhead--in the cost of a unit of product.
Unit Product Cost
The total cost to produce one unit of a product, including materials, labor, and overhead.
Cost Structure
The composition of a firm's fixed and variable costs, used to understand the financial impact of its operations and pricing strategies.
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