Problem 14-14 Prepare and Interpret a Statement of Cash Flows [LO14-1, LO14-2]

PROBLEM 14-14 Prepare and Interpret a Statement of Cash Flows L014-1, L014-2] A comparative balance sheet for Lomax Company containing data for the last two years is as Lomax Company Balance Sheet This Year Last Yea Current assets: $ 61,000 710,000 848,000 10,000 1,629,000 3,170,000 810,000 2,360,000 60,000 214,000 $4,263.000 S 40,000 530,000 860,000 5,000 1,435,000 2,600,000 755,000 1,845,000 Cash and cash equivalents Accounts receivable Total current assets . Property, plant, and equipment . . . . . . Less accumulated depreciation Net property, plant, and equipment. Long-term investments Loans to subsidiaries Total assets 170,000 $3,560,000 Liabilities and Stockholders' Equity Current liabilities: S 970,000 65,000 95,000 1,130,000 820,000 1,950,000 $ 670,000 82,000 80,000 832,000 00,000 1.432,000 Accrued liabilities Income taxes payable Total current liabilities Bonds payable Total liabilities Stockholders' equity: 1,740,000 573,000 2,313,000 $4,263,000 1,650,000 478,000 2,128,000 $3,560,000 Common stock . Total stockholders' equity.... Total liabilities and stockholders' equity The following additional information is available about the company's activities during this year: a The company declared and paid a cash dividend this year b. Bonds with a principal balance of $350,000 were repaid during this year c. Equipment was sold during this year for $70,000. The equipment had cost S130.000 and had $40,000 in accumulated depreciation on the date of sale. Long-term investments were sold during the year for S110.000. These investments had cost S50.000 when purchased several years ago. d. e. The subsidiaries did not repay any outstanding loans during the year f. Lomax did not repurchase any of its own stock during the year. The company reported net income this year as follows: Sales Cost of goods sold Gross margin Selling and administrative expenses.... Net operating income Nonoperating items: S2,000,000 1,300,000 700,000 490,000 210,000 Gain on sale of investments $60,000 Loss on sale of equipment Income before taxes Income taxes... Net income 40,000 250,000 80,000 $ 170,000 1. 2. Using the indirect method. prepare a statement of cash flows for this year What problems relating to the company's activities are revealed by the statement of cash flows that you have prepared