Metro Video Inc. is developing its annual financial statements at
December 31, 2011. The statements are complete except for the statement
of cash flows. The completed comparative sheets and income statement are
summarized:
2011 2010
Balance sheet at December 31
Cash $68,250 $65,500
Accounts receivable 15,250 22,250
Merchandise inventory 22,250 18,000
Property and equipment 209,250 150,000
Less: Accumulated depreciation (59,000) (45,750)
Accounts payable $9,000 $19,000
Wages payable 4,000 1,200
Note payable, long-term 59,500 71,000
Contributed capital 98,500 65,900
Retained earnings 85,000 52,900
$256,000 $210,000
Income statement for 2011
Sales $195,00
Cost of goods sold 92,000
Depreciation expense 13,250
Other expenses 43,000
Net income $46,750
Additional Data:
a. Bought equipment for cash, $59,250
b. Paid $11,500 on the long-term note payable.
c. Issued new shares of stock for $32,600 cash.
d. Dividends of $14,650 were declared and paid.
e. Other expenses all relate to wages. f. Accounts payable includes only inventory purchases made on credit.
Required:
1. Prepare the statement of cash flows using the indirect method for the year ended December 31, 2011.
2. Based on the cash flow statement, write a short paragraph explaining
the major sources and uses of cash by Metro Video during 2011.
Click here for the solution: Metro Video Inc. is developing its annual financial statements at December 31, 2011
