haron Feldman, president of Allied Products, considers $20,000 to be a minimum cash balance for operating purposes. As can be seen from the following statements, only $15,000 in cash was available at the end of 2008. Since the company reported a large net income for the year, and also issued bonds and sold some long-term investments, the sharp decline in cash is puzzling to Ms. Feldman.
Comparative Balance Sheet
December 31, 2008, and 2007
Total current assets
Plant and equipment
Less accumulated depreciation
Net plant and equipment
Liabilities and Stockholders' Equity
Total current liabilities
Deferred income taxes
Total stockholders' equity
Total liabilities and stockholders' equity
For the Year Ended December 31, 2008
Cost of goods sold
Selling and administrative expenses
Net operating income
Non operating items:
Gain on sale of investments
Loss on sale of equipment
Income before taxes
The following additional information is available for the year 2008:
The company sold long-term investments with an original cost of $30,000 for $50,000 during the year.
Equipment that had cost $90,000 and on which there was $40,000 in accumulated depreciation was sold during the year for $44,000.
Cash dividends totaling $28,000 were declared and paid during the year.
The stock of a dissident stockholder was repurchased for cash and retired during the year. No issues of stock were made.
Using the indirect method, prepare a statement of cash flows for 2008.
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