Page 651 - Accounting Principles (A Business Perspective)

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Demonstration problem
The following comparative balance sheets are for Dells Corporation as of 2010 June 30, and 2009 June 30. Also
provided is the statement of income and retained earnings for the year ended 2010 June 30, with additional data.

Dells Company
Comparative balance sheet
2010 June 30 and 2009
2010 2009 Increase
(Decrease)
Assets
Current assets:
Cash $ 30,000 $ 80,000 $ (50,000)
Accounts receivable, net 160,000 100,000 60,000
Merchandise inventory 100,000 70,000 30,000
Prepaid rent 20,000 10,000 10,000
Total current assets $310,000 $260,000 $ 50,000
Property, plant, and equipment:
Equipment $400,000 $200,000 $200,000
Accumulated depreciation – (60,000) (50,000) (10,000)
equipment
Total property, plant, and $340,000 $150,000 $190,000
equipment

Liabilities and stockholders'
equity
Current liabilities:
Accounts payable $ 50,000 $ 40,000 $ 10,000
Notes payable – bank -0- 50,000 (50,000)
Salaries payable 10,000 20,000 (10,000)
Federal income taxes payable 30,000 20,000 10,000
Total current liabilities $ 90,000 $130,000 $ (40,000)
Stockholders' equity:
Common stock, $10 par $300,000 $100,000 $200,000
Paid-in capital in excess of par 50,000 -0- 50,000
Retained earnings 210,000 180,000 30,000
Total stockholders' equity $560,000 $280,000 $280,000
Total liabilities and stockholders' $650,000 $410,000 $240,000
equity
Dells Corporation
Statement of income and retained earnings
For the year ended 2010 June 30
Sales $1,000,000
Cost of goods sold $600,000
Salaries and wages expense 200,000
Rent expense 40,000
Depreciation expense 20,000
Interest expense 3,000
Loss on sale of equipment 7,000 870,000
Income before federal income taxes $ 130,000
Deduct: Federal income taxes 60,000
Net income $ 70,000
Retained earnings, 2009 July 1 180,000
$ 250,000
Deduct: Dividends 40,000
Retained earnings, 2010 June 30 $210,000
Equipment with a cost of USD 20,000, on which USD 10,000 of depreciation had been recorded, was sold for
USD 3,000 cash. Additional equipment was purchased for USD 220,000.
Stock was issued for USD 250,000 cash.
The USD 50,000 bank note was paid.
Using the data given for Dells Corporation:

a. Prepare a statement of cash flows—indirect method.

Accounting Principles: A Business Perspective 652 A Global Text