Cash Flows and Indirect Method

Solution Summary

Statement of Cash Flows

The management of Banciu Corporation provides you with the comparative analysis of changes
in account balances between December 21, 2010, and December 31, 2011, appearing below.

___________December 31,____________________ December 31, ___________
2011 2010
Debit balances
Accounts receivable $306,000 $327,600
Cash 174,000 223,200
Inventories 579,600 645,600
Leasehold improvements 104,400 104,400
Machinery and equipmen t 1,112,400 776,400
Patents 33,360 36,000
Totals $2,489,760 $2,113,200

Credit balances
Accounts payable $279,360 $126,000
Accumulated amoritization of leasehold
improvements 69,600 58,800
Accumulated depreciation of machinery
and equipment 499,200 446,400
Allowance for uncollectible accounts 19,200 20,400
Cash dividend paybale 48,000 0
Common stock 600,000 600,000
Current portion of 6% serial bonds payable 60,000 60,000
Preferred stock 108,000 120,000
Retained earnings 506,400 321,600
6% Serial bonds payble - noncurrent portion 300,000 360,000
Totals $2,489,760 $2,113,200

Supplemental Information:
a. The following table prsents a comparative analysis of ratained earnings as of December 31, 2010, and December 31, 2011.

___________________________________ December 31,____________
2011 2010
Beginning balance $321,600 $157,200
Net Income 234,000 206,400
555,600 363,600
Dividends declared -48,999 -42,000
Premium on repurchased preferred stock -1,200 0
Ending balance $506,400 $321,600

b. On december 10, 2011, the board of directors declared a cash dividend of $0.24 per share, payable to holders of
common stock on January 10, 2012.
c. Purchased new machinery for $463,000. In addition, Banciu sold certain machinery it was no longer using for $57,600.
The machinery had a carryoing value of $73,200. Banciu made no other entries in Machinery and equipment or related
accounts other than for depreciation.
d. Purchased 120 preferred shares, par value $100, at $110 and subsequently canceled the shares. Banciu debited the
premium paid to Retained earnings.
e. Paid $2,400 of legal costs in successful defense of a new patent, which ir correctly debited to the Patents account.
It recorded patent amortization amounting to $4,040 during the year ended December 31, 2011.
f. During 2011, Banciu wrote off accountrs receivable totaling $3,600 as uncollectible.

1. Prepare the entries (in general journal form) that would be entered into T-accounts needed to prepare a statement of
cash flows from the data given.

2. Prepare a statement of cash flows for Banciu Corporation for 2011. Use the indirect method for presenting cash flow from operations