P23-1

SULLIVAN CORP
Statement of Cash Flows
For the Year Ended December 31, 2014
Cash flows from operating activities
Net Income $370,000
Adjustment to reconcile net income
to net cash provided by operating activities:
Depreciation $147,000
Gain on sale of equipment -2,000
Equity in earnings of Myers Co. -35,000
Decrease in accounts receivable 40,000
Increase in inventory -135,000
Increase in accounts payable 60,000
Decrease in income taxes payable -20,000 55,000
Net cash provided by operating activities 425,000

Cash flows from investing activities:

Proceeds from sale of equipment 40,000
Loan to TCL Co -300,000
Principal payment of loan receiveable 50,000
Net cash used by investing activities -210,000

Cash flows from financing activities

Dividends paid -100,000
Net cash used by financing activities -100,000

Net increase in cash 115,000

Cash, January 1, 2014 700,000
Cash, December 31, 2014 815,000
Schedule at bottom of statement of cash flows:

Noncash investing and financing activities:

Issuance of capital lease liability for
office building $400,000

Explanation of Amount

(a) Depreciation
Net Increase in accumulated
depreciation for the year ended
31-Dec-14 $125,000
Accumulated depreciation on equipment sold:
Cost $60,000
Carrying value -38,000 22,000
Depreciation for 2014 $147,000

(b) Gain on sale equipment

Proceeds $40,000
Carrying value -38,000
Gain $2,000

(c) Equity in earnings of Myers Co.

Myers' net income for 2014 $140,000
Sullivan's ownership 25%
Undistributed earnings of Myers Co $35,000
P23-2

Cash flows from operating activities

Net income $14,750 (a)
Adjustment to reconcile net income
to net cash provided by operating activities:
Los on sales of equipment $4,100 (b)
Gain from flood damage -8,250
Depreciation expense 1,900 (c)
Patent amortization 1,250
Gain on sale of investment -1,700
Increase in accounts receivable (net) -3,750
Increase inventory -3,000
Increase in accpunts payable 2,000 -7,450
Net cash provided by operating activities 7,300

Cash flows from investing activities

Sale of investments 4,700
Sale of equipment 2,500
Purchase of equipment -20,000
Proceeds from flood damage to building 32,000
Net cash provided by investing activities 19,200

Cash flows from financing activities

Payment of dividends -5,000
Payment of short-term note payable -1,000
Net cash used by financing activities -6,000

Increase in cash 20,500

Cash, January 1, 2014 13,000
Cash, December 31, 2014 33,500
Supplemental disclosures of cash flow information

Cash paid during the year for:

Interest
Income taxes

Noncash investing and financing activities

Retired notes payable by issuing commons stock
Purchased equipment by issuing notes payable

SupportingComputations:

(a) Ending retained earnings