Louisiana Company uses the indirect method to prepare its statement of cash flows.Refer to the following portion of the comparative balance sheet: $\begin{array}{c}
\text {Lotisiana Company}\
\text { Comparative Balance Sheet}\
\text {December 31, 2019 and 2018}\\begin{array}{|l|r|r|r|}
\hline&2018 & 2017 & \text { Increase/(Decrease) }\
\hline \text { Common Stock } & \$ 31,000 & \$ 2200 & \$ 28,800 \
\hline \text { Retained Earnings } & 120,000 & 79,000 & 41,000 \
\hline \text { Treasury Stock } & (13,000) & (8500) & (4500) \
\hline \text { Total Equity } & \$ 138,000 & \$ 72,700 & \$ 65,300 \
\hline
\end{array}\end{array}$
Note:
1)There were no stock retirements during the year.
2)There were no sales of treasury stock during the year.
Compute the cash flow from transactions involving treasury stock.

Question

Louisiana Company uses the indirect method to prepare its statement of cash flows.Refer to the following portion of the comparative balance sheet: $\begin{array}{c}
 \text {Lotisiana Company}\
 \text { Comparative Balance Sheet}\  
\text {December 31, 2019 and 2018}\\begin{array}{|l|r|r|r|}
\hline&2018 & 2017 & \text { Increase/(Decrease) }\ 
\hline \text { Common Stock } & \$ 31,000 & \$ 2200 & \$ 28,800 \
\hline \text { Retained Earnings } & 120,000 & 79,000 & 41,000 \
\hline \text { Treasury Stock } & (13,000) & (8500) & (4500) \
\hline \text { Total Equity } & \$ 138,000 & \$ 72,700 & \$ 65,300 \
\hline
\end{array}\end{array}$
 Note:
1)There were no stock retirements during the year.
2)There were no sales of treasury stock during the year.
Compute the cash flow from transactions involving treasury stock.

Quizplus · Accepted Answer

Given there were no sales of treasury stock during the year, the increase in treasury stock (from -$8,500 to -$13,000, an increase of -$4,500) indicates the company spent $4,500 to purchase treasury stock, resulting in a negative cash flow of $4,500.

Louisiana Company Uses the Indirect Method to Prepare Its Statement