UV7000

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Jun. 18, 2015

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Kesmore Corporation

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Kesmore Corporation’s balance sheet as of December 31, 2014, and December 31, 2013, and information
pertaining to its 2014 activities are presented below.

December 31,
Assets 2014 2013

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Cash $15,000 $90,000
Short-term investments 200,000 –
Accounts receivable (net) 590,000 440,000
Inventory 600,000 615,000
Long-term investments 310,000 390,000
Property, plant, and equipment (gross) 1,800,000 1,100,000
Accumulated depreciation (500,000) (500,000)
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Property, plant, and equipment (net) 1,300,000 600,000
Goodwill 95,000 105,000
Total assets $3,110,000 $2,240,000

Liabilities and Stockholders’ Equity

Accounts payable $900,000 $850,000

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Short-term debt 190,000 –

Common stock 1,155,000 975,000
Retained earnings 865,000 415,000
Total liabilities and stockholders’ equity $3,110,000 $2,240,000

Information relating to 2014 activities:


No

Net income was $800,000.

 Equipment costing $450,000 and having a book value of $200,000 was sold for $200,000.
 A long-term investment was sold for $150,000. There were no other transactions affecting long-term
investments in 2013.
 Depreciation expense was $250,000.

Required
Do

Prepare a statement of cash flows for 2014 using the indirect method.

This exercise was prepared by Luann J. Lynch, Almand R. Coleman Professor of Business Administration, and Mary Margaret Frank, Associate Professor
of Business Administration. Copyright  2015 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order
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