P23-1 (SCFIndirect Method) The following is Sullivan Corp.’s comparative balance sheet accounts at December 31, 2010 and 2009, with a column showing…

P23-1 (SCF—Indirect Method) The following is Sullivan Corp.’s comparative balance sheet accountsat December 31, 2010 and 2009, with a column showing the increase (decrease) from 2009 to 2010.COMPARATIVE BALANCE SHEETSIncrease2010 2009 (Decrease)Cash $ 815,000 $ 700,000 $115,000Accounts receivable 1,128,000 1,168,000 (40,000)Inventories 1,850,000 1,715,000 135,000Property, plant and equipment 3,307,000 2,967,000 340,000Accumulated depreciation (1,165,000) (1,040,000) (125,000)Investment in Myers Co. 310,000 275,000 35,000Loan receivable 250,000 — 250,000Total assets $6,495,000 $5,785,000 $710,000Accounts payable $1,015,000 $ 955,000 $ 60,000Income taxes payable 30,000 50,000 (20,000)Dividends payable 80,000 100,000 (20,000)Capital lease obligation 400,000 — 400,000Capital stock, common, $1 par 500,000 500,000 —Additional paid-in capital 1,500,000 1,500,000 —Retained earnings 2,970,000 2,680,000 290,000Total liabilities and stockholders’ equity $6,495,000 $5,785,000 $710,000Additional information:1. On December 31, 2009, Sullivan acquired 25% of Myers Co.’s common stock for $275,000. On thatdate, the carrying value of Myers’s assets and liabilities, which approximated their fair values, was$1,100,000. Myers reported income of $140,000 for the year ended December 31, 2010. No dividendwas paid on Myers’s common stock during the year.2. During 2010, Sullivan loaned $300,000 to TLC Co., an unrelated company. TLC made the first semiannualprincipal repayment of $50,000, plus interest at 10%, on December 31, 2010.3. On January 2, 2010, Sullivan sold equipment costing $60,000, with a carrying amount of $38,000, for$40,000 cash.4. On December 31, 2010, Sullivan entered into a capital lease for an office building. The present valueof the annual rental payments is $400,000, which equals the fair value of the building. Sullivanmade the first rental payment of $60,000 when due on January 2, 2011.5. Net income for 2010 was $370,000.6. Sullivan declared and paid cash dividends for 2010 and 2009 as shown below.2010 2009Declared December 15, 2010 December 15, 2009Paid February 28, 2011 February 28, 2010Amount $80,000 $100,000PROBLEMS Chapter 23 Statement of Cash FlowsInstructionsPrepare a statement of cash flows for Sullivan Corp. for the year ended December 31, 2010, using theindirect method.(AICPA adapted)

Property & Plant A/CParticularsAmount $ParticularsTo balance b/d2,967,000 By accumulated dep.To profit on sale2,000 By CashTo cash purchase400,000 By Balance c/dTotal3,369,000 Total…

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