Chapter 22, Problem 22.8P

Statement of Cash Flows, Indirect Method, Complex Accounts, Disclosures. Prepare the cash flow statement for Norwich Manufacturing, Inc. under the direct method using the information provided in P22-7. Provide all required disclosures.

Norwich Manufacturing, Inc. Balance Sheets At December 31
Assets	Current Year	Prior Year
Current Assets
Cash	$ 45,000	$ 22,000
Available-for-Sale Debt Investments	58,000	82,000
Accounts Receivable - net	95,000	55,000
Merchandise Inventory	135,000	95,000
Total Current Assets	$ 333,000	$254,000

Norwich Manufacturing, Inc. Balance Sheets At December 31
	Current Year	Prior Year
Noncurrent Assets
Investments in Affiliate Companies	$ 265,000	$ 100,500
Property. Plant, and Equipment - net	1,364,500	1,530,500
Intangible Assets - net	87,500	125,000
Total Noncurrent Assets	$ 1,717,000	$1,756,000
Total Assets	$2,050,000	$2,010,000
Liabilities
Current Liabilities

Current Portion of Long-Term Debt	$ 25,000	$ 65,800
Accounts Payable	187,000	128,500
Dividends Payable	75,000	55,000
Income Taxes Payable	65,800	58,500
Total Current Liabilities	$ 352,800	$ 307,800
Noncurrent Liabilities
Bonds Payable	$ 400,000	$ 400,000
Less: Discount on Bonds	(128,500)	(145,000)
Notes Payable	225,500	225,000
Deferred Tax Liability	62,500	72,500
Net Obligations under Pension Plans	80,000	60,000
Total Noncurrent Liabilities	$ 639,500	$ 612,500
Total Liabilities	$ 992,300	$ 920,300
Shareholders' Equity
Common Stock. $1 par value	$ 135,000	$ 135,000
Additional Paid-in Capital in Excess of Par - Common	351,500	351,500
Additional Paid-in Capital - Stock Options	16,500	0
Retained Earnings	685,000	523,700
Accumulated Other Comprehensive Income	(130,300)	79,500
Total Shareholders' Equity	$ 1,057,700	$1,089,700
Total Liabilities and Shareholders' Equity	$2,050,000	$2,010,000

Norwich Manufacturing, Inc. Income Statement For the Current Year Ended December 31
Sales	$2,433,244
Cost of Goods Sold	1,459,946
Gross Profit	$ 973,298
Selling, General, and Administrative Expenses	$ 59,800
Pension Expense	260,510
Bad Debt Expense	1,650
Depreciation Expense	19,470
Amortization Expense	7,425
Total Operating Expenses	$ 348,855
Operating Income	$ 624,443
Interest Expense	$ (55,110)
Investment Income (includes gain on sale)	55,000
Equity Earnings from Affiliate Companies	164,500
Income before Tax	$ 788,833
Income Tax Expense	(301,873)
Net Income	$ 486,960

Additional information

• Norwich sold available-for-sale investments that had been acquired for $55,000 at a gain of $40, 500 It included this gain in investment income on the income statement.
• The company acquired additional shares as investments to be earned at fair value It accounted for all investments except for investments carried under the equity method as available-for-sale securities It recorded a $9, 000 unrealized loss for the current year.
• It reported accounts receivable net of the allowance for bad debts
• It sold equipment at book value.
• It did not increase its percentage ownership of its equity investee (affiliate company)
• It sold one of its franchises at book value
• It signed a $100,000 promissory note issued by an equipment dealer in the acquisition of a plant asset
• It did not borrow additional cash funds during the year

Required

Prepare Norwich Manufacturing s cash flow statement for the current year using the indirect method Present required disclosures.