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					23-2. December 31 2010 2009 33,500 13,000 Cash 12,250 10,000 Accounts Receivable
12,000 9,000 Inventory 0 3,000 Investments 0 29,750 Building 45,000 20,000 Equipment
5,000 6,250 Patent 107,750 91,000 Total 3,000 4,500 Allowance for doubtful accounts
2,000 4,500 Accumlated depreciation on equipment 0 6,000 Accumalted depreciation on
building 5,000 3,000 Accounts Payable 0 5,000 Dividends Payable 3,000 4,000 Notes
Payables, short term non trade 31,000 25,000 Long term notes payable 43,000 33,000
Common stock 20,750 6,000 Retain Earning 107,750 91,000 Total Additional data
related to 2010 are as follows: 1. Equipment that had cost 11,000 and was 40%
depreciated at the time of disposal was ssold for 2,500. 2. $10,000 of the long term note
payable was paid by issuing common stock/. 3. Cash dividends paid were $5,000 4. On
January 1, 2010 the building was completely destroyed by a flood. Insurance proceeds on
the building were $30,000 (net of $2,000 taxes) 5. Investments (available for sale) were
sold at $1,700 above their cost. The company has made similar sales and investments in
the past. 6. Cash was paid for the acquisition of equipment 7. A long term note for
$16,000 was issued for the acquisition of equipment. 8. Interest of $2,000 and income
taxes of $6,500 were paid in cash. Prepare a statement of cash flows using the indirect
method. Flood damage is unusual and infrequent in that part of the country.


                                                HINCKLEY CORPORATION
                                                   Statement of Cash Flows
                                            For the Year Ended December 31, 2010

Cash flows from operating activities
      Net income .............................................................................                  $14,750 (a)
      Adjustments to reconcile net income
        to net cash provided by operating
        activities:
           Loss on sale of equipment ............................................                $ 4,100 (b)
           Gain from flood damage ..............................................                  (8,250) *
           Depreciation expense ....................................................               1,900 (c)
           Patent amortization ......................................................              1,250
           Gain on sale of investments .........................................                  (1,700)
           Increase in accounts receivable (net) ..........................                       (3,750)**
           Increase in inventory ....................................................             (3,000)
           Increase in accounts payable .......................................                    2,000        (7,450)
      Net cash provided by operating activities ..........................                                       7,300

Cash flows from investing activities
      Sale of investments ...............................................................          4,700
      Sale of equipment .................................................................          2,500
      Purchase of equipment .........................................................            (20,000) (d)
      Proceeds from flood damage to building............................                          32,000
         Net cash provided by investing activities ...........................                                               19,200

Cash flows from financing activities
      Payment of dividends ...........................................................                            (5,000)
      Payment of short-term note payable ..................................                                       (1,000)
      Net cash used by financing activities ..................................                                               (6,000)

Increase in cash ...............................................................................                             20,500
Cash, January 1, 2010.....................................................................                                   13,000
Cash, December 31, 2010................................................................                                     $33,500


 *($30,000 + $2,000) – ($29,750 – $6,000)
**($12,250 – $3,000) – ($10,000 – $4,500)

Supplemental disclosures of cash flow information:

        Cash paid during the year for:
            Interest                                                                  $2,000
            Income taxes:                                                             $6,500

Noncash investing and financing activities
    Retired note payable by issuing common stock                                                                              $10,000
    Purchased equipment by issuing note payable                                                                                16,000
                                                                                                                              $26,000
Supporting Computations:

(a)     Ending retained earnings................................................................                              $20,750
        Beginning retained earnings ...........................................................                                (6,000)
        Net income ........................................................................................                   $14,750

(b)     Cost ..................................................................................................               $11,000
        Accumulated depreciation (40% X $11,000) ...............................                                               (4,400)
        Book value .......................................................................................                    $ 6,600
        Proceeds from sale ..........................................................................                          (2,500)
        Loss on sale .....................................................................................                    $ 4,100

(c)     Accumulated depreciation on equipment sold ..............................                                             $ 4,400
        Decrease in accumulated depreciation ..........................................                                        (2,500)
        Depreciation expense .......................................................................                          $ 1,900
(d)   Beginning equipment balance ........................................................             $20,000
      Cost of equipment sold ....................................................................      (11,000)
      Remaining balance ..........................................................................        9,000
      Purchase of equipment with note ...................................................                16,000
      Adjusted balance .............................................................................     25,000
      Ending equipment balance .............................................................            (45,000)
      Purchased with cash ........................................................................     $20,000

				
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