Condensed financial data follow for Lancer Ltd. 

Additional information:

1. New equipment costing $99,000 was purchased for $39,000 cash and a $60,000 note payable.

2. Equipment with an original cost of $57,500 was sold at a loss of$7,500.

3. Notes payable matured during the year and were repaid.

Instructions

Prepare a cash flow statement for the year using the indirect method. 

TAKING IT FURTHER

If a company has a loss, does that also mean that there has been a net reduction in cash from operating activities? Explain.

Transcribed Image Text:

LANCER LTD. Balance Sheet December 31 Assets 2014 2013 $ 97,800 $ 48,400 Cash Accounts receivable 75,800 43,000 Inventory Prepaid expenses Property, plant, and equipment Accumulated depreciation 92,850 122,500 38,400 26,000 356,500 (52,000) 398,000 (50,000) Total assets $682,500 $514,750 Liabilities and Shareholders’ Equity Accounts payable Accrued expenses payable Notes payable (non-trade) Common shares $ 77,300 $107,000 11,500 110,000 7,000 150,000 175,000 220,000 Retained earnings 234,000 105,450 Total liabilities and shareholders' equity $682,500 $514,750 LANCER LTD. Income Statement Year Ended December 31, 2014 Sales $492,780 Cost of goods sold Gross profit Operating expenses Depreciation expense Loss on sale of equipment Profit from operations Other expenses Interest expense 185,460 307,320 $62,410 46,500 7,500 116,410 190,910 4,730 Profit before income tax 186,180 Income tax expense 45,000 Profit $141,180