Seneca Corporation has contracted with you to prepare a statement of cash flows. The controller has provided
Question:
Seneca Corporation has contracted with you to prepare a statement of cash flows. The controller has provided the following information.
Additional data related to 2008 are as follows.
1. Equipment that had cost $11,000 and was 40% depreciated at time of disposal was sold for $2,500.
2. $5,000 of the long-term note payable was paid by issuing common stock.
3. Cash dividends paid were $5,000.
4. On January 1, 2008, the building was completely destroyed by a flood. Insurance proceeds on the building were $33,000 (net of $4,000 taxes).
5. Investments (available-for-sale) were sold at $2,500 above their cost. The company has made similar sales and investments in the past.
6. Cash of $10,000 was paid for the acquisition of equipment.
7. A long-term note for $16,000 was issued for the acquisition of equipment.
8. 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 Seneca.
Flood damage is unusual and infrequent in that part of the country.
(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 which is experiencing rapidgrowth?
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
Intermediate Accounting principles and analysis
ISBN: 978-0471737933
2nd Edition
Authors: Terry d. Warfield, jerry j. weygandt, Donald e. kieso