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Pr. 23-128—Statement of cash flows (indirect method).
The net changes in the balance sheet accounts of Keating Corporation for the year 2011 are shown below.
Account Debit Credit
Cash$ 82,000
Short-term investments$121,000
Accounts receivable83,200
Allowance for doubtful accounts13,300
Inventory74,200
Prepaid expenses17,800
Investment in subsidiary (equity method)20,000
Plant and equipment210,000
Accumulated depreciation130,000
Accounts payable80,700
Accrued liabilities21,500
Deferred tax liability15,500
8% serial bonds80,000
Common stock, $10 par90,000
Additional paid-in capital150,000
Retained earnings—Appropriation for bonded indebtedness60,000
Retained earnings—Unappropriated 38,000
$643,600$643,600

An analysis of the Retained Earnings—Unappropriated account follows:
Retained earnings unappropriated, December 31, 2010$1,300,000
Add:Net income327,000
Transfer from appropriation for bonded indebtedness 60,000
Total$1,687,000
Deduct:Cash dividends$185,000
Stock dividend 240,000 425,000
Retained earnings unappropriated, December 31, 2011$1,262,000

1.On January 2, 2011 short-term investments (classified as available-for-sale) costing $121,000 were sold for $155,000. 2.The company paid a cash dividend on February 1, 2011.
3.Accounts receivable of $16,200 and $19,400 were considered uncollectible and written off in 2011 and 2010, respectively. 4.Major repairs of $33,000 to the equipment were debited to the Accumulated Depreciation account during the year. No assets were retired during 2011. 5.The wholly owned subsidiary reported a net loss for the year of $20,000. The loss was recorded by the parent. 6.At January 1, 2011, the cash balance was $166,000.

Instructions
Prepare a statement of cash flows (indirect method) for the year ended December 31, 2011. Keating Corporation has no securities which are classified as cash equivalents.
Solution 23-128
Keating Corporation
Statement of Cash Flows
For the Year Ended December 31, 2011
Increase (Decrease) in Cash

Cash flows from operating activities
Net income$327,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in subsidiary loss$ 20,000
Depreciation expense163,000
Gain on sale of short-term investments(34,000)
Decrease in deferred tax liability(15,500)
Increase in accounts receivable (net)(69,900)
Increase in inventory(74,200)
Decrease in prepaid expenses17,800
Decrease in accounts payable(80,700)
Increase in accrued liabilities 21,500 (52,000)

Net cash provided by operating activities275,000

Cash flows from investing activities
Sale of short-term investments155,000
Purchase of plant and equipment(210,000)
Major repairs to equipment (33,000)

Net cash provided by investing activities(88,000)

Cash flows from financing activities
Payment of cash dividend(185,000)
Sale of serial bonds 80,000

Net cash used by financing activities (105,000)

Net increase in cash82,000
Cash, January 1, 2011 166,000
Cash, December 31, 2011$248,000

Pr. 23-129—Statement of cash flows (direct and indirect methods). Hartman, Inc. has prepared the following comparative balance sheets for 2010 and 2011:
2011 2010
Cash$ 297,000$ 153,000
Receivables159,000117,000
Inventory150,000180,000
Prepaid expenses18,00027,000
Plant assets1,260,0001,050,000
Accumulated depreciation(450,000)(375,000)
Patent 153,000 174,000
$1,587,000$1,326,000

Accounts...
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