Managerial Accounting: P24-1A A comparative balance sheet for Cole, Inc. on December 31, 2013

Managerial Accounting

Problem 24-1A
A comparative balance sheet for Cole, Inc. on December 31, 2013 follows. Additional information about the firm's financial activities during 2013 is also given below.
Instructions:
Prepare a statement of cash flows for 2013. Additional information for the year follows:
a. Had net income of $80,000.
b. Recorded $18,000 in depreciation.
c. Issued bonds payable with a par value of $50,000 at par and received cash.
d. Received $10,000 in cash for the issue of an additional 1,000 shares of $10 par value common stock.
e. Purchased equipment for $50,000 in cash.
Cole, Inc.
Comparative Balance Sheet
December 31, 2013 and 2012
Assets 2013 2012
Cash 77,900 39,500
Accounts receivable (net) 129,600 79,600
Merchandise Inventory 45,600 43,000
Property, Plant and Equipment 240,000 190,000
Less: Accumulated depreciation (37,000) (19,000)
Total Assets $456,100 $333,100
Liabilities
Accounts payable 45,000 62,000
Bonds payable 150,000 100,000
Total Liabilities 195,000 162,000
Stockholders' Equity
Common stock ($1 par, 50,0000 shares authorized, 5,000 shares issued in 2012 and 6,000 shares issued in 2013) 60,000 50,000
Retained Earnings 201,100 121,100
Total Stockholders' Equity 261,100 171,100
Total Liabilities and Stockholders' Equity $456,100 $333,100

Analyze: Explain why an increase in accounts payable is considered an adjustment to cash flow from operating activities.
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