Preparing the statement of cash flows - indirect method with non-cash transactions

2015

Follow:

ROLLING HILLS, INC.

Income Statement

Year Ended December 31, 2015

Sales Revenue $436,000

Cost of Goods Sold 202,200

Gross Profit 233,800

Operating Expenses:

Salaries Expense $78,400

Depreciation Expense - Plant Assets 14,400

Other Operating Expenses 10,200

Total Operating Expenses 103,000

Operating Income 130,800

Other Revenues and (Expenses):

Interest Revenue 8,000

Interest Expense (21,900)

Total Other Revenues and (Expenses) (13,900)

Net Income Before Income Taxes 116,900

Income Tax Expense 19,100

Net Income $97,800

ROLLING HILLS, INC.

Comparative Balance Sheet

December 31, 2015 and 2014

2015 2014

Assets

Currents Assets:

Cash $26,400 $15,900

Accounts Receivable 26,700 25,500

Merchandise Inventory 79,800 91,700

Long-term Assets:

Plant Assets 124,680 107,640

Accumulated Depreciation -Plant Assets (20,780) (17,940)

Land 34,600 11,000

Total Assets $271,400 $233,800

Liabilities

Current Liabilities:

Accounts Payable $35,500 $30,600

Accrued Liabilities 28,600 30,700

Long-term Liabilities:

Notes Payable 78,000 101,000

Total Liabilities $142,100 $162,300

Stockholders Equity

Common Stock 88,800 64,900

Retained Earnings 40,500 6,600

Total Stockholders Equity 129,300 71,500

Total Liabilities and Stockholders Equity $271,400 $233,800

Additionally, Rolling Hills purchased land of $23,600 by financing it 100% with long-term notes payable during 2015. During the year, there were no sales of land, no retirements of stock, and no treasury stock transactions. A plant asset was disposed of for $0. The cost and the accumulated depreciation of the disposed asset was $11,560.

Requirements:

1. Prepare the 2015 statement of cash flows, formatting operating activities by the indirect method.

2. How will what you learned in this problem help you evaluate an investment?