Refer to the information for Booth Manufacturing above.Required:1. Calculate the cash flows from operations using the indirect method.2. Prepare a statement of cash flows.3. CONCEPTUAL CONNECTION Search the Internet to find a statement of cash flows.Which method was used—the indirect method or the direct method? How does the netincome reported compare to the operating cash flows? To the change in cash flows? Use the following information for Problems 14-48 and 14-49:Booth Manufacturing has provided the following financial statements.Booth ManufacturingComparative Balance SheetsAt December 31, 20XI and 20X220X120X2AssetsCash$ 112,500$ 350,000Accounts reccivable350,000281,250Inventories125,000150,000Plant and equipmentAccumulated depreciation1,000,0001,025,000(500,000)(525,000)Land500,000718,750Total assets$1,587,500$2,000,000Liabilities and equityAccounts payableMortgage payableCommon stock$ 300,000$ 237,500250,00075,00075,000Paid-in capital in excess of parRetained carnings300,000300,000912,5001,137,500Total liabilities and equity$1,587,500$2000,000Booth ManufacturingIncome StatementFor the Year Ended December 31, 20X2RevenuesGain on sale of cquipmentCost of goods soldDepreciation cxpenseInterest expense$1,200,00050,000(640,000)(125,000)(35,000)Net income$ 450,000Other information includes: (a) equipment with a book value of $125,000 was sold for$175,000 (original cost was $225,000) and (b) dividends of $225,000 were declared and paid.

Statement of cash flows forms a part of financial statements and is prepared with a view to…

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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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Refer to the information for Booth Manufacturing above.
Required:
1. Calculate the cash flows from operations using the indirect method.
2. Prepare a statement of cash flows.
3. CONCEPTUAL CONNECTION Search the Internet to find a statement of cash flows.
Which method was used—the indirect method or the direct method? How does the net
income reported compare to the operating cash flows? To the change in cash flows?

Use the following information for Problems 14-48 and 14-49:
Booth Manufacturing has provided the following financial statements.
Booth Manufacturing
Comparative Balance Sheets
At December 31, 20XI and 20X2
20X1
20X2
Assets
Cash
$ 112,500
$ 350,000
Accounts reccivable
350,000
281,250
Inventories
125,000
150,000
Plant and equipment
Accumulated depreciation
1,000,000
1,025,000
(500,000)
(525,000)
Land
500,000
718,750
Total assets
$1,587,500
$2,000,000
Liabilities and equity
Accounts payable
Mortgage payable
Common stock
$ 300,000
$ 237,500
250,000
75,000
75,000
Paid-in capital in excess of par
Retained carnings
300,000
300,000
912,500
1,137,500
Total liabilities and equity
$1,587,500
$2000,000
Booth Manufacturing
Income Statement
For the Year Ended December 31, 20X2
Revenues
Gain on sale of cquipment
Cost of goods sold
Depreciation cxpense
Interest expense
$1,200,000
50,000
(640,000)
(125,000)
(35,000)
Net income
$ 450,000
Other information includes: (a) equipment with a book value of $125,000 was sold for
$175,000 (original cost was $225,000) and (b) dividends of $225,000 were declared and paid.

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