The comparative balance sheet of Hobson Medical Equipment Inc. for December 31, 2013 and 2012, is as… 1 answer below »

Statement of cash flows-indirect method

The comparative balance sheet of Hobson Medical Equipment Inc. for December 31, 2013 and 2012, is as following:

Dec. 31, 2013

Dec. 31, 2012

Assets

$294

$96

Accounts receivable (net)

168

120

Inventories

105

66

Land

240

270

Equipment

135

105

Accumulated depreciation-equipment

(36)

(18)

Total

$906

$639

Liabilities and Stockholder’s Equity

Accounts payable (merchandise creditors)

$105

$96

Dividends payable

18

Common Stock $10 par

60

30

Paid-in-capital in excess of par common stock

150

75

Retained earnings

573

438

Total

$906

$639

The following additional information is taken from the records:

a. Land was sold for $75.

b. Equipment was acquired for cash.

c. There were no disposals of equipment during the year.

d. The common stock was issued for cash.

e. There was a $195 credit to Retained Earnings for net income.

f. There was a $60 debit to retained Earnings for cash dividends declared.

Respond to the following:

Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.

Was Hobson Medical Equipment’s cash flow from operations more or less than net income? What is the source of this difference?

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