Prepare and Analyze a Statement of Cash Flows, Indirect Method and Direct Method. Ritz Company’s most recent balance sheet, income statement, and other important information for 2012 are presented as follows.
Additional data for 2012 are as follows:
o Sold equipment with a book value of $15,000 (= $100,000 cost − $85,000 accumulated depreciation) for $32,000 cash
o Purchased equipment for $140,000 cash
o Sold long-term investments for $23,000 cash and these investments had an original cost of $24,000 o Purchased long-term investments for $5,000 cash
o Issued bonds for $105,000 cash o Issued common stock for $7,000 cash
o Declared and paid $11,000 in cash dividends Required:
h. Use the four steps described in the chapter to prepare a statement of cash flows for the year ended December 31, 2012, using the indirect method. Refer to the format presented in.
i. The owner of Ritz Company wants to know why cash decreased from $350,000 to $278,000 given the company’s net income of $18,000. Use the information in the statement of cash flows to briefly explain why cash decreased.
j. Use the four steps described in the chapter, as well as in the appendix, to prepare a statement of cash flows for the year ended December 31, 2012, using the directmethod. Refer to the operating activities section format using the direct method presented in and the adjustment rules for the direct method presented in .