The comparative, unclassified statement of financial position for Alton Ltd. shows the following balances at December 31:
Question:
Additional information regarding 2018:
1. Net income was $10,000.
2. A loss of $21,000 was recorded on the disposal of a small parcel of land. No land was purchased during the year.
3. A gain on disposal of $15,000 was recorded when an old building was sold for $40,000 cash. A new building was purchased for $520,000 and depreciation expense on buildings for the year was $42,000.
4. Equipment costing $72,000 was purchased while a loss of $11,000 was recorded on equipment that originally cost $42,000 and was sold for $21,000.
5. The company received $512,000 from new bank loans during the year.
6. Dividends were declared and paid during the year.
7. No common shares were issued during the year but some were bought back and retired at the amount they were originally issued at.
Instructions
(a) Prepare the statement of cash flows using the indirect method.
(b) Did the company manage its noncash working capital effectively?
(c) The company's banker is worried. Why?
Step by Step Answer:
Financial Accounting Tools for Business Decision Making
ISBN: 978-1119368458
7th Canadian edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine