Summary Practice doc involving setting up an indirect cash flow statement

Cash flow problem

The Carpet Company’s 2008 and 2007 balance sheets included the following items:


December 31
2008 2007
Debits
Cash .......................................................................................... $10,500 $ 4,000
Accounts receivable...................................................................... 8,000 9,000
Merchandise inventory.................................................................. 21,000 18,000
Equipment..................................................................................... 18,000 15,000
Totals................................................................................ $57,500 $46,000

Credits
Accumulated depreciation, equipment.......................................... $ 4,000 $ 3,000
Accounts payable.......................................................................... 7,000 5,000
Taxes payable............................................................................... 1,000 2,000
Dividends payable......................................................................... 1,500 0
Common stock, $10 par value....................................................... 27,000 25,000
Contributed capital in excess of par, common stock..................... 6,000 5,000
Retained earnings......................................................................... 11,000 6,000
Totals................................................................................ $57,500 $46,000


The Carpet Company’s income statement was as follows:

CARPET COMPANY
Income Statement
For the Year Ended December 31, 2008


Sales .......................................................................................... $61,000
Cost of goods sold........................................................................ $40,000
Wages and other operating expenses........................................... 6,300
Income taxes expense.................................................................. 4,200
Depreciation expense................................................................... 1,500 52,000
Net income.................................................................................... $ 9,000

Additional information includes the following:

a. Equipment costing $3,500 was purchased during the year.
b. Fully depreciated equipment that cost $500 was discarded and its cost and
accumulated depreciation were removed from the accounts.
c. Two hundred shares of stock were sold and issued at $15 per share.
d. The company declared $4,000 of cash dividends and paid $2,500.

, CLASSIFYING ACTIVITIES IN THE STATEMENT OF CASH FLOWS

OPERATING ACTIVITIES
Cash inflows from Cash outflows to
 Sale of goods or services  Suppliers of goods and
 Interest services
 Dividends  Salaries and wages
 Sale of trading securities  Government for taxes
 Other operating receipts  Lenders for interest
 Settlement of lawsuits  Purchase trading securities

INVESTING ACTIVITIES
Cash inflows from Cash outflows to
 Sale of long-term productive assets  Purchase of long-term
productive assets
 Sale of available-for-sale securities, notes  Purchase available-for-sale
and held-to maturity securities securities and held-to
maturity
securities
 Collection of principal on loans  Make loans to another entity
to other entities

FINANCING ACTIVITIES
Cash inflows from Cash outflows to
 Sale of capital stock or owner  Shareholders as dividends (or
investment owner’s withdrawal)
 Issuance of bonds and notes  Repay debts (loans)
 Issuing short-term and long-term debt  Purchase treasury stock

NONCASH INVESTING AND FINANCING ACTIVITIES
 Retirement of debt by issuing equitystock
 Conversion of preferred stock to common stock
 Leasing of assets in a capital lease transaction
 Purchase of a long-term asset by issuing a note or a bond
 Exchange of noncash assets for other noncash assets
 Purchase of noncash assets by issuing equity or debt




>>> Determine the cash flows from operating, investing and
financing