Preparing a statement of cash flow. (Adapted from CPA examination.) Roth Company has prepared its financial statements for the year ended December 31, 2008, and for the three months ended March 31, 2009. You will prepare a statement of cash flows for the three months ended March 31, 2009. Exhibit 15.9 presents the company's balance sheet at December 31, 2008, and March 31, 2009, and Exhibit 15.10 presents its income statement for the three months ended March 31, 2009. You believe that the amounts presented are correct.
Your discussion with the company's controller and a review of the financial records reveal the following information:
(1) On January 8, 2009, the company sold marketable securities for cash. The firm had purchased these securities on December 31, 2008. The firm purchased no marketable securities during 2008.
(2) The company's preferred stock is convertible into common stock at a rate of one share of preferred for two shares of common. The preferred stock and common stock have par values of $2 and $1, respectively.
(3) On January 17, 2009, the local government condemned three acres of Land. Roth Company received an award of $48,000 in cash on March 22, 2009. It does not expect to purchase additional land as a replacement.
(4) On March 25, 2009, the company purchased equipment for cash.
(5) Interest expense on bonds payable exceeded the cash coupon payments by $225 during the three-month period. On March 29, 2009, the company issued bonds payable for cash.
(6) Roth Company declared 512,000 in dividends during the three months.
a. Prepare a T-account work sheet for the preparation of a statement of cash flows, defining funds as cash and cash equivalents
b. Prepare a formal statement of cash flows for Roth Company for the three months ending March 31, 2009. Use the indirect method
c. Derive a presentation of cash flows from operations using the directmethod.