Refer to the information for Farrell Corporation in P21-13.
Problem 13
The following are Farrell Corporation's balance sheets of as of December 31, 2013, and 2012,
and the statement of income and retained earnings for the year ended December 31, 2013:

Additional information:
a. On January 2, 2013, Farrell sold equipment costing $45,000, with a book value of $24,000, for $19,000 cash.
b. On April 2, 2013, Farrell issued 1,000 shares of common stock for $23,000 cash.
c. On May 14, 2013, Farrell sold all of its treasury stock for $25,000 cash.
d. On June 1, 2013, Farrell paid $50,000 to retire bonds with a face value (and book value) of $50,000.
e. On July 2, 2013, Farrell purchased equipment for $63,000 cash.
f. On December 31, 2013, land with a fair market value of $150,000 was purchased through the issuance of a long-term note in the amount of $150,000. The note bears interest at the rate of 15% and is due on December 31, 2015.
g. Deferred taxes payable represent temporary differences relating to the use of accelerated depreciation methods for income tax reporting and the straight-line method for financial statement reporting.
Required:
1. Using the direct method for operating cash flows, prepare a spreadsheet to support a 2013 statement of cash flows. (Hint: Combine the income statement and December 31, 2013, balance sheet items for the adjusted trial balance. Use a retained earnings balance of $291,000 in this adjusted trial balance.)
2. Prepare the statement of cash flows. (A separate schedule reconciling net income to cash provided by operating activities is not necessary.)

Transcribed Image Text:

Balance Sheets December 31 Increasee (Decrease) 2013 2012 Assets Cash Accounts receivable, net Inventories Investment in Hall Inc. at equity Land Plant and equipment Less: Accumulated depreciation Patent Total Assets $ 225,000 180,000 45,000 (10,000) 118,000 13,000 150,000 18,000 (32,000) 305,000 431,000 60,000 200,000 606,000 (139,000) (107,000) 20,000 295,000 549,000 73,000 350,000 624,000 16,000 $1,993,000 $1,695,000 $298,000 Liabilities and Shareholders' Equity Accounts payable and accrued expenses Note payable, long-tem Bonds payable Deferred taxes payable Common stock, $10 par Additional paid-in capital Retained earnings Treasury stock, at cost Total Liabilities and Shareholders' Equity $ 604,000 S 563,000 41,000 150,000 (50,000) 11,000 10,000 21,000 98,000 17,000 $1,993,000 $1,695,000 $298,000 150,000 160,000 41,000 410,000 196,000 432,000 210,000 30,000 400,000 175,000 334,000 Statement of Income and Retained Earnings For the Year Ended December 31, 2013 Net sales Operating expenses: $1,950,000 Cost of sales Selling and administrative expenses Depreciation $1,150,000 505,000 53,000 Operating income Other (income) expense Interest expense Equity in net income of Hall, Inc. Loss on sale of equipment Amortization of patent $ 15,000 (13,000) 5,000 4,000 $ 11,000 $ 231,000 Income before income taxes Income taxes: $ 79,000 11,000 $ 90,000 $ 141,000 334,000 Current Deferred Provision for income taxes Net income Retained eamings, January 1, 2013 Cash dividends, paid August 13, 2013 Retained eamings, December 31, 2013 43,000