The comparative balance sheets and income statements for Gypsy Company follow:Additional DataDuring Year 2, the company sold equipment for $23,500; it had originally cost $38,000. Accumulated depreciation on this equipment was $16,000 at the time of the sale.The company sold land that had cost $6,000, resulting in the recognition of a $100 loss. Also, common stock was issued in exchange for title to land that was valued at $22,000 at the time of exchange.Prepare a statement of cash flows using the indirect method (don’t forget the supplementary noncash activities shown after the statement). AssetsCashAccounts receivableInventoryEquipmentAccumulated depreciation-equipmentLandTotal assetsLiabilities and equityAccounts payable (inventory)Long-term debtCommon stockRetained earningsTotal liabilities and equityBalance SheetsAs of December 31$$Year 2$32,5004,75011,20045,000(17,80028,000103,650$ 3,7505,80047,00047,100103,650$Year 116,3002,8009,80052,000(21,80012,00071,100$ 4,9007,80025,00033,40071,100) Income StatementFor the Year Ended December 31, Year 2Sales revenueCost of goods soldGross marginDepreciation expenseOperating incomeGain on sale of equipmentLoss on disposal of landNet income$$61,200(24,5005)36,700(12,00024,7001,500(100)26,100

Answered: The comparative balance sheets and…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

The comparative balance sheets and income statements for Gypsy Company follow:

Additional Data

During Year 2, the company sold equipment for $23,500; it had originally cost $38,000. Accumulated depreciation on this equipment was $16,000 at the time of the sale.
The company sold land that had cost $6,000, resulting in the recognition of a $100 loss.
Also, common stock was issued in exchange for title to land that was valued at $22,000 at the time of exchange.

Prepare a statement of cash flows using the indirect method (don’t forget the supplementary noncash activities shown after the statement).

Assets
Cash
Accounts receivable
Inventory
Equipment
Accumulated depreciation-equipment
Land
Total assets
Liabilities and equity
Accounts payable (inventory)
Long-term debt
Common stock
Retained earnings
Total liabilities and equity
Balance Sheets
As of December 31
$
$
Year 2
$
32,50
0
4,750
11,20
0
45,00
0
(17,8
00
28,00
0
103,6
50
$ 3,750
5,800
47,00
0
47,10
0
103,6
50
$
Year 1
16,30
0
2,800
9,800
52,00
0
(21,8
00
12,00
0
71,10
0
$ 4,900
7,800
25,00
0
33,40
0
71,10
0
)

Income Statement
For the Year Ended December 31, Year 2
Sales revenue
Cost of goods sold
Gross margin
Depreciation expense
Operating income
Gain on sale of equipment
Loss on disposal of land
Net income
$
$
61,20
0
(24,5
00
5)
36,70
0
(12,0
00
24,700
1,500
(100)
26,10
0

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The cash flow statement is prepared to record the cash flow from various activities during the period. The various activities for the cash flow statement are classified as operating, investing and financing activities.

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