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P13-9A

 Condensed financial data of Arma Inc. follow.

 

ARMA INC.

Comparative Balance Sheets

December 31

Assets 2011 2010

Cash $ 90,800 $ 48,400

Accounts receivable 92,800 33,000

Inventories 112,500 102,850

Prepaid expenses 28,400 26,000

Investments 138,000 114,000

Plant assets 270,000 242,500

Accumulated depreciation (50,000) (52,000)

Total $682,500 $514,750

Liabilities and Stockholders’ Equity

Accounts payable $112,000 $ 67,300

Accrued expenses payable 16,500 17,000

Bonds payable 110,000 150,000

Common stock 220,000 175,000

Retained earnings 224,000 105,450

Total $682,500 $514,750

 

ARMA INC.

Income Statement

For the Year Ended December 31, 2011

Sales $392,780

Less:

Cost of goods sold $135,460

Operating expenses, excluding

depreciation 12,410

Depreciation expense 46,500

Income taxes 27,280

Interest expense 4,730

Loss on sale of plant assets 7,500 233,880

Net income $158,900

 

Additional information:

1. New plant assets costing $85,000 were purchased for cash during the year.

2. Old plant assets having an original cost of $57,500 were sold for $1,500 cash.

3. Bonds matured and were paid off at face value for cash.

4. A cash dividend of $40,350 was declared and paid during the year.

Instructions

Prepare a statement of cash flows using the indirect method.