Chapter 22, Problem 22.5P

Statement of Cash Flows, Indirect Method, Complex Accounts, Disclosures. The Khan Group provided its balance sheet and income statement as of December 31 of the current year.

The Khan Group Balance Sheets At December 31
Assets	Current Year		Prior Year
Current Assets
Cash	$ 15,000	$ 12,000
Trading Debt Investments	36,000	30,000
Accounts Receivable - net	65,000	35,000
Merchandise Inventory	105,000	115,000
Total Current Assets	$ 221,000	$ 192,000
Noncurrent Assets
Investments in Affiliate Companies	$ 161,500	$ 100,500
Property. Plant, and Equipment - net	1,533,050	1,128,580
Intangible Assets - net	95,200	88,000
Total Noncurrent Assets	$1,789,750	$ 1,317,080
Total Assets	$2,010,750	$1,509,080
Liabilities

Current Liabilities
Current Portion of Long-Term Debt	$ 6,000	$ 4,500
Accounts Payable	87,500	92,500
Dividends Payable	5,000	0
Income Taxes Payable	28,500	30,000
Total Current Liabilities	$ 127,000	$ 127,000
Noncurrent Liabilities
Bonds Payable	$ 425,000	$ 425,000
Less: Discount on Bonds	(87,500)	(100,250)
Notes Payable	52,500	10,000
Deferred Tax Liability	3,750	1,250
Net Obligations under Pension Plans	45,000	22,630
Total Noncurrent Liabilities	$ 438,750	$ 358,630
Total Liabilities	$ 565,750	$ 485,630
Shareholders' Equity
Common Stock. $1 par value	$ 60,000	$ 50,000
Additional Paid-in Capital in Excess of Par - Common	132,100	122,100
Additional Paid-in Capital - Stock Options	2,900	0
Retained Earnings	1,175,000	781,850
Accumulated Other Comprehensive Income	75,000	69,500
Total Shareholders' Equity	$1,445,000	$1,023,450
Total Liabilities and Shareholders' Equity	$2,010,750	$1,509,080

The Khan Group Income Statement For the Current Year Ended December 31
Sales	$2,212,040
Cost of Goods Sold	1,327,224
Gross Profit	$ 884,816
Selling. General, and Administrative Expenses	$ 43,000
Unrealized Losses on Trading Portfolio	$ 3,600
Pension Expense	210,500
Bad Debt Expense	1,500
Depreciation Expense	17,700
Amortization Expense	6,750
Total Operating Expenses	$ 283,050
Operating Income	$ 601,766
Interest Expense	$ (50,100)
Investment Income (includes gain on sale)	50,000
Equity Earnings from Affiliate Companies	118,500
Income before Tax	$ 720,166
Income Tax Expense	(288,066)
Net Income	$ 432,100

Additional information

• The company classifies its current investments as trading securities. During the current year it sold trading securities that had been acquired for $34,500. Treat the trading securities as an investing activity.
• The company reported accounts receivable net of the allowance for bad debts.
• The company acquired equipment during the year and made no disposals Paid cash.
• The company did not acquire nor dispose of intangible assets during the year.
• The company included a $40,500 gain on the sale of trading investments in investment income on the income statement.
• The change in accumulated other comprehensive income is the result of pension adjustments.
• There were no additional investments in affiliate companies during the year.
• There were no debt issuances during the year.

Required

Prepare the company's cash flow statement for the current year under the indirect method. Provide all required disclosures.