Exercise NO: 2

Each of the following items must be considered in preparing a statement of cash flows (indirect method) for Turbulent Indigo Inc. for the year ended D

Each of the following items must be considered in preparing a statement of cash flows (indirect method) for Turbulent Indigo Inc. for the year ended December 31, 2014.

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(a) Plant assets that had cost $20,000 6 years before and were being depreciated on a straight-line basis over 10 years with no estimated scrap value were sold for $5,300.

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(b) During the year, 10,000 shares of common stock with a stated value of $10 a share were issued for $43 a share.

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(c) Uncollectible accounts receivable in the amount of $27,000 were written off against Allowance for Doubtful Accounts.

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(d) The company sustained a net loss for the year of $50,000. Depreciation amounted to $22,000, and a gain of $9,000 was realized on the sale of land for $39,000 cash.

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(e) A 3-month U.S. Treasury bill was purchased for $100,000. The company uses a cash and cash equivalent basis for its cash flow statement.

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(f) Patent amortization for the year was $20,000.

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(g) The company exchanged common stock for a 70% interest in Tabasco Co. for $900,000.

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(h) During the year, treasury stock costing $47,000 was purchased.

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Instructions

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State where each item is to be shown in the statement of cash flows, if at all.

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