FINANCIAL ACCOUNTING - Eighth Edition

Solutions Manual

E12-20A
(20-30 min.)
Learning Objective 3: Preparing the statement of cash flowsindirect
method
The income statement and additional data of Newbury Travel Products, Inc., follow:
Newbury Travel Products, Inc.
Income Statement
Year Ended December 31, 2010
Revenues:
Service revenue ................................................................... $ 283,000
Dividend revenue..................................................................
8,000
Expenses:
Cost of goods sold ..............................................................
103,000
Salary expense ....................................................................
78,000
Depreciation expense.........................................................
26,000
Advertising expense ...........................................................
4,500
Interest expense ..................................................................
2,600
Income tax expense.............................................................
8,000
Net income .....................................................................

$ 291,000

222,100
68,900

Additional data:
a. Acquisition of plant assets was $212,000. Of this amount, $160,000 was paid in
cash and $52,000 by signing a note payable.
b. Proceeds from sale of land totaled $27,000.
c. Proceeds from issuance of common stock totaled $80,000.
d. Payment of long-term note payable was $17,000.
e. Payment of dividends was $13,000.
f.
From the balance sheets:
December 31,
2010
2009
Current Assets:
Cash.......................................................................................$
Accounts receivable ............................................................
Inventory.................................................................................
Prepaid expenses.................................................................
Current Liabilities:
Accounts payable..................................................................$
Accrued liabilities .................................................................

Chapter 12: The Statement of Cash Flows

30,000
42,000
30,000
9,400

10,800
59,000
91,000
8,700

38,000
18,000

27,000
99,000

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FINANCIAL ACCOUNTING - Eighth Edition

Solutions Manual

Requirements
1. Prepare Newburys statement of cash flows for the year ended December 31,
2010, using the indirect method.
2. Evaluate Newburys cash flows for the year. In your evaluation, mention all three
categories of cash flows and give the reason for your evaluation.

Solution:
Req. 1
Newbury Travel Products, Inc.
Statement of Cash Flows
Year Ended December 31, 2010

Chapter 12: The Statement of Cash Flows

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FINANCIAL ACCOUNTING - Eighth Edition

Solutions Manual

Req. 2

Chapter 12: The Statement of Cash Flows

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