Question: You have completed the field work in
You have completed the field work in connection with your audit of Alexander Corporation for the year ended December 31, 2012. The balance sheet accounts at the beginning and end of the year are shown below.
Your working papers from the audit contain the following information:
1. On April 1, 2012, the existing deficit was written off against paid-in capital created by reducing the stated value of the no-par stock.
2. On November 1, 2012, 29,600 shares of no-par stock were sold for $257,000. The board of directors voted to regard $5 per share as stated capital.
3. A patent was purchased for $15,000.
4. During the year, machinery that had a cost basis of $16,400 and on which there was accumulated depreciation of $5,200 was sold for $9,000. No other plant assets were sold during the year.
5. The 12%, 20-year bonds were dated and issued on January 2, 2000. Interest was payable on June 30 and December 31. They were sold originally at 106. These bonds were retired at 100.9 plus accrued interest on March 31, 2012.
6. The 8%, 40-year bonds were dated January 1, 2012, and were sold on March 31 at 97 plus accrued interest. Interest is payable semiannually on June 30 and December 31. Expense of issuance was $839.
7. Alexander Corporation acquired 70% control in Crimson Company on January 2, 2012, for $100,000. The income statement of Crimson Company for 2012 shows a net income of $15,000.
8. Extraordinary repairs to buildings of $7,200 were charged to accumulated depreciation—Buildings.
9. Interest paid in 2012 was $10,500 and income taxes paid were $34,000.
Instructions
From the information given, prepare a statement of cash flows using the indirect method. A worksheet is not necessary, but the principal computations should be supported by schedules or general ledger accounts. The company uses straight-line amortization for bond interest.
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Increase Dec. 31, Dec. 31, or 2012 2011 (Decrease) Cash $ 277,900 $ 298,000 ($20,100) Accounts receivable Inventory Prepaid expenses Investment in subsidiary 469,424 741,700 353,000 610,000 8,000 116,424 131,700 4,000 12,000 110,500 2,304 207,000 -0- 110,500 Cash surrender value of life insurance 1,800 190,000 504 Machinery Buildings Land 17,000 535,200 52,500 407,900 127,300 52,500 -0- Patents 64,000 69,000 40,000 5,000 (10,000) Copyrights Bond discount and issue cost 50,000 4,502 -0- 4,502 $2,522,030 $2,035,200 $486,830 $ 10,650 Accrued taxes payable Accounts payable Dividends payable Bonds payable-8% Bonds payable-12% 90,250 79,600 280,000 299,280 19,280 70,000 125,000 -0- 70,000 125,000 (100,000) (4,700) 24,000 -0- -0- 100,000 Allowance for doubtful accounts 35,300 424,000 173,000 40,000 Accumulated depreciation-buildings Accumulated depreciation-machinery Premium on bonds payable Common stock-no par Paid-in capital in excess of 400,000 130,000 2,400 43,000 (2,400) (277,000) -0- 1,176,200 1,453,200 par-common stock Retained earnings-unappropriated 109,000 20,000 -0- 109,000 470,000 (450,000) $2,522,030 $2,035,200 $486,830 Statement of Retained earnings FOR THE YEAR ENDED DECEMBER 31, 2012 January March 1, 2012 31, 2012 Balance (deficit) Net income for first quarter of 2012 Transfer from paid-in capital $(450,000) 25,000 Аpril 1, 2012 425,000 Balance -0- December 31, 2012 Net income for last three quarters of 2012 Dividend declared-payable January 21, 2013 90,000 (70,000) Balance $ 20,000
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