Accounting Question Help Please! Statement of Cash Flows?
These three accounts appear in the general ledger of Tovar Corp. during 2010:
Equipment
Date DebitCreditBalance
Jan. 1Balance160,000
July 31Purchase of equipment70,000230,000
Sept.2Cost of equipment constructed53,000283,000
Nov.10Cost of equipment sold49,000234,000
Accumulated Depreciation — Equipment
Date DebitCreditBalance
Jan. 1Balance71,000
Nov. 10Accumulated depreciation on
equipment sold30,00041,000
Dec. 31Depreciation for year28,00069,000
Retained Earnings
Date DebitCreditBalance
Jan. 1Balance105,000
Aug. 23Dividends (cash)19,00086,000
Dec. 31Net income72,000158,000
From the postings in the accounts, indicated how the information is reported on the statement of cash flows, using the indirect method below. The loss on sale of equipment was ,000. (Hint: Cost of equipment constructed is reported in the investing activities section as a decrease in cash of ,000.) (If the amount reduces cash flow put either a negative sign preceding the number, e.g. -45 or parenthesis, e.g. (45). List amounts from largest positive to smallest positive followed by most negative to least negative, e.g. 15, 14, 10, -17, -5, -1.)
TOVAR CORP
Partial Statement of Cash Flows
For the Year Ended December 31, 2010
Cash flows from operating activities
Net income$ 72,000
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation expense$ 28,000
Loss on sale of equipment
8,000
36,000
Net cash provided by operating activities 108,000
Cash flows from investing activities
Sale of equipment<——–This is the only part that I do not understand.
Purchase of equipment (70,000)
Construction of equipment
(53,000)
Net cash used by investing activities
Cash flows from financing activities
Payment of cash dividends (19,000)
I did all but one part which I cannot seem to get. (pointed out above) Thank you for your help in advance!
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If you’ll look at the information given, the cost of the equipment sold was $49,000 and the accumulated depreciation on it was $30,000. That leaves a book value of $19,000. Since there was a loss of $8,000, the equipment must have been sold for $11,000. So that’s what you put as your cash flow from the sale of equipment.