Acct 2500 - Chapter 12 Problems with Answers

Prepare the operating activities section of the statement of cash flows for the year ended November 30, 2025, for Pearl Company, using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).) PEARL COMPANY Statement of Cash Flows (Partial) – Indirect Method For the Year Ended November 30, 2025 Cash Flows from Operating Activities Net Income 1,788,700 Adjustments to reconcile net income to Net Cash Provided by Operating Activities: Depreciation Expense 111,700 Decrease in Accounts Receivable 373,400 Decrease in Inventory 279,300 Increase in Prepaid Expenses (150,700) Decrease in Accounts Payable (354,300) Decrease in Accrued Expenses Payable (98,500) 160,900 Net Cash Provided by Operating Activities 1,949,600 4. Sarasota Corporation’s comparative balance sheets are as follows. Sarasota Corporation Comparative Balance Sheets December 31 2025 2024 Cash $15,500 $17,400 Accounts receivable 25,000 22,400 Investments 20,300 15,300 Equipment 60,200 70,500 Accumulated depreciation—equipment (14,700) (10,600) Total $106,300 $115,000 Accounts payable $14,000 $11,100 Bonds payable 11,000 33,000 Common stock 54,000 46,500 Retained earnings 27,300 24,400 Total $106,300 $115,000 Additional information: 1. Net income was $19,000. Dividends declared and paid were $16,100. 2. Equipment which cost $10,300 and had accumulated depreciation of $1,200 was sold for $3,600. 3. No noncash investing and financing activities occurred during 2025. 4. Bonds were retired at their carrying value. a. Prepare a statement of cash flows for 2025 using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

BRIDGEPORT CORP. Statement of Cash Flows (Partial) – Indirect Method For the Year Ended December 31, 2025 Cash Flows from Operating Activities Net Income $82,800 Adjustments to reconcile net income to Net Cash Provided by Operating Activities: Depreciation Expense $32,200 Loss on Disposal of Plant Assets 9,200 41,400 Net Cash Provided by Operating Activities 124,200 Cash Flows from Investing Activities Sale of Equipment 28,750 Purchase of Equipment (141,450) Net Cash Used by Investing Activities (112,700) Cash Flows from Financing Activities Payment of Cash Dividends (16,100) Net Cash Used by Financing Activities (16,100) Cost of Equipment Sold = 56,350 Accumulated Depreciation on Equipment Sold = 18,400 Book Value of Equipment Sold = 56350-18400 = 37,950 Loss on Disposal of Plant Assets = 9,200 Therefore, selling price of plan asset = 37,950-9,200 = 28,750 Depreciation Expense = 32,200 Purchase of Equipment = 80500 + 60950 = 141,450 Net Income = 82,800 Payment of Dividend = 16,100