Question

A comparative balance sheet and income statement for Groton Company follow:

Groton Company
Comparative Balance Sheet
December 31, 2011 and 2010

2011

2010

  Assets

  Cash

$

1  

$

12   

  Accounts receivable

363  

269   

  Inventory

198   

256   

  Prepaid expenses

48   

46   

  Total current assets

610

583   

  Property, plant, and equipment

549   

470   

  Less accumulated depreciation

(89)   

(75)   

  Net property, plant, and equipment

460

395

  Long-term investments

28

32   

  Total assets

$

1,098

1,010   

  Liabilities and Stockholders' equity

  Accounts payable

$

321

245   

  Accrued liabilities

90   

100   

  Income taxes payable

72   

63   

  Total current liabilities

483   

408   

  Bonds payable

238   

212   

  Total liabilities

721   

620   

  Common stock

203

242   

  Retained earnings

174

148   

  Total stockholders’ equity

377   

390   

  Total liabilities and stockholders' equity

$

1,098   

1,010

Groton Company
Income Statement
For the Year Ended December 31, 2011

  Sales

$

724  

  Cost of goods sold

449

  Gross margin

275

  Selling and administrative expenses

182

  Net operating income

93

  Non operating items:

      Gain on sale of investments

$

6  

      Loss on sale of equipment

(3)

3

  Income before taxes

96

  Income taxes

31

  Net income

$

65

During 2011, Groton sold some equipment for $38 that had cost $51 and on which there was accumulated depreciation of $10. In addition, the company sold long-term investments for $10 that had cost $4 when purchased several years ago. A cash dividend was paid during 2011 and the company repurchased $39 of its own stock. Groton did not retire any bonds during 2011.

Required:
1.	Using the indirect method, determine the net cash provided by/used by operating activities for 2011. (Negative amount should be entered with a minus sign.)

2.	Using the information in (1) above, along with an analysis of the remaining balance sheet accounts, prepare a statement of cash flows for 2011. (Amounts to be deducted and negative amounts should be indicated with a minus sign.)

Answer 1

Answer 1 and 2.

Fixed Assets Purchased = Ending Property, Plant and Equipment + Cost of Equipment Sold - Beginning Property, Plant and Equipment
Fixed Assets Purchased = $549 + $51 - $470
Fixed Assets Purchased = $130

Depreciation Expense = Ending Accumulated Depreciation + Depreciation on Equipment Sold - Beginning Accumulated Depreciation
Depreciation Expense = $89 + $10 - $75
Depreciation Expense = $24

Dividend Paid = Beginning Retained Earnings + Net Income - Ending Retained Earnings
Dividend Paid = $148 + $65 - $174
Dividend Paid = $39