Statement of Cash Flows (Indirect Method) - New Balance Athletics, Inc.

Objective

• Prepare the Statement of Cash Flows for New Balance Athletics, Inc. for the year ended December 31, 2024, using the indirect method.

Financial Data Provided

• Comparative Balance Sheets as of December 31, 2023 and 2024 (Assets, Liabilities & Shareholders' Equity).
  • Cash: 2023: $45,000, 2024: $81,000 (Net increase/decrease in cash to be reconciled).

Additional Information and Adjustments

Operating Activities Adjustments

• Net Income for 2024: $42,000$
• Depreciation Expense: $42,000$
• Charges from Prepaid Expenses: $5,720$
  • (Requires analysis of changes in current assets/liabilities from Balance Sheet).

Investing Activities

• Land sold for cash at book value ($25,000$ sale, based on balance sheet change).
• Equipment purchased for cash: $88,000$
• Equipment with a cost of $22,000$ and book value of $10,000$ was sold for cash: $6,000$ (implies a loss on sale of $4,000$).

Financing Activities

• Cash dividends paid: $20,000$
• Bonds converted at face value into common stock ($40,000$ conversion from Bonds Payable decrease offset by Common Stock increase).

Key Concepts for Indirect Method

• Start with Net Income.
• Adjust for non-cash expenses (e.g., depreciation) and gains/losses (e.g., gain/loss on sale of assets).
• Adjust for changes in current assets and liabilities (excluding cash).
• Separately report cash flows from investing and financing activities.