Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 107

Complete balance sheet and prepare a statement of cash flows—indirect method Following is a partially completed balance sheet for Hoeman, Inc., at December 31, 2011, together with comparative data for the year ended December 31, 2010. From the statement of cash flows for the year ended December 31, 2011, you determine the following:

• Net income for the year ended December 31, 2011, was $94,000.

• Dividends paid during the year ended December 31, 2011, were $67,000.

• Accounts receivable decreased $10,000 during the year ended December 31, 2011.

• The cost of new buildings acquired during 2011 was $125,000.

• No buildings were disposed of during 2011.

• The land account was not affected by any transactions during the year, but the fair market value of the land at December 31, 2011, was $178,000.

HOEMAN, INC. Comparative Balance Sheets At December 31, 2011 and 2010
	2011	2010
Assets
Current assets:
Cash	$ 52,000	$  46,000
Accounts receivable		1 34,000
Inventory	156,000	176,000
Total current assets	$	$  356,000
Land	$	140,000
Buildings		290,000
Less: Accumulated depreciation	(120,000)	(105,000)
Total land and buildings	$	$  325,000
Total assets	$	$  681,000
Liabilities
Current liabilities:
Accounts payable	$	$  197,000
Note payable	155,000	124,000
Total current liabilities	$ 322,000	$  321,000
Long-term debt	$	$  139,000
Owners’ Equity
Common stock	$ 50,000	$  45,000
Retained earnings		176,000
Total owners’ equity	$	$  221,000
Total liabilities and owners’ equity	$	$  681,000

Required:

a. Complete the December 31, 2011, balance sheet. (Hint: Long-term debt is the last number to compute to make the balance sheet balance.)

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b. Prepare a statement of cash flows for the year ended December 31, 2011, using the indirect method.

Step 1 of 10

Complete balance sheet & prepare a cash flow statement using indirect method

Cash flow statement: It is the financial statement that estimates the total of cash generated or used in a company’s business during a given period of time.

a.

Prepare balance sheet:

Balance sheet:

Balance sheet is a statement of financial position. It is one of the main reports in financial statements. It shows the financial position of the company. Balance sheet will be prepared for a specific period. It summarizes a company’s assets, liabilities and shareholders’ equity. It is prepared by using accounting equation that is ’Assets = Liabilities + Stockholders’ Equity’.

Steps to computing the balance sheet:

• Total assets are derived from current assets, long term investments, property, plant, and equipment, and intangible assets.

• The total liability is derived from current liability, long term debt, contributed capital, and retained earnings.

• The total assets and total liabilities should be equal in the balance sheet.

H, INC.
Balance Sheets
December 31, 2011, and 2014
Particulars	2014	2013
Assets:
Current assets:
Cash	52,000	46,000
Accounts receivable	124,100	134,000
Inventory	156,000	176,000
Total current assets	332,000	356,000
Land	140,000	140,000
Buildings	415,000	290,000
Less: Accumulated depreciation	(120,000)	(105,000)
Total land & buildings	435,000	325,000
Total assets	767,000	681,000
Liabilities:
Current liabilities:
Accounts payable	167,000	197,000
Note payable	155,000	124,000
Total current liabilities	322,000	321,000
Long-term debt	192,000	139,000
Owners' Equity:
Common stock	50,000	45,000
Retained earnings	203,000	176,000
Total owners' equity	253,000	221,000
Total liabilities and owners' equity	767,000	681,000