Question

Dingel Corporation has contracted with you to prepare a statement of cash flows.
The controller has provided the following information.


Additional data related to 2010 are as follows.
1. Equipment that had cost $11,000 and was 30% depreciated at time of disposal was sold for $2,500.
2. $5,000 of the long-term note payable was paid by issuing ordinary shares.
3. Cash dividends paid were $5,000.
4. On January 1, 2010, the building was completely destroyed by a flood. Insurance proceeds on the building were $33,000 (net of $4,000 taxes).
5. Equity investments (non-trading) were sold at $1,500 above their cost. The company has made similar sales and investments in the past.
6. Cash and a long-term note for $16,000 were given for the acquisition of equipment.
7. Interest of $2,000 and income taxes of $5,000 were paid in cash.

Instructions
(a) Use the indirect method to analyze the above information and prepare a statement of cash flows for Dingel.
(b) What would you expect to observe in the operating, investing, and financing sections of a statement of cash flows of:
(1) A severely financially troubled firm?
(2) A recently formed firm that is experiencing rapidgrowth?


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  • CreatedJune 17, 2013
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