Financial Accounting: In an Economic Context

REVIEW PROBLEM

Figure 14-21 contains balance sheets (December 31, 2011 and 2012) for XYZ Enterprises and the intervening income statement. Following these statements are several selected pieces of information that more completely describe the activity of XYZ during 2012. The two forms of the statement of cash flows are contained in Figures 14-22 (direct method) and 14-23 (indirect method). We have included relevant calculations on the statements to explain how the numbers were derived. Examine each cash flow statement closely, and trace the calculations back to the original financial statements and information given in Figure 14-21.

FIGURE 14-21 Financial statements for XYZ Enterprises

FIGURE 14-22 Statement of cash flows for XYZ Enterprises: Direct method

Additional information

1. Purchased $3,000 of prepaid rent.
2. Sold a piece of machinery (cost: $5,000; accumulated depreciation: $3,000) for $3,000 cash. Purchased additional machinery for $10,000 cash.
3. Paid annual interest of $2,500 on note payable.
4. Issued 500 shares of $10 par value common stock for $12 per share.

FIGURE 14-23 Statement ...