Question

The following information is taken from Smith Corporation's financial statements:

December 31

2020   2019

Cash	$100,000	$ 27,000
Accounts receivable	95,000	80,000
Allowance for doubtful accounts	(4,500)	(3,100)
Inventory	145,000	175,000
Prepaid expenses	7,500	6,800
Land	100,000	60,000
Buildings	287,000	244,000
Accumulated depreciation	(35,000)	(13,000)
Patents	20,000    ————————       $715,000	35,000 ————————   $611,700
Accounts payable	$ 90,000	$ 84,000
Accrued liabilities	54,000	63,000
Bonds payable	135,000	60,000
Common stock	100,000	100,000
Retained earnings——appropriated	80,000	10,000
Retained earnings——unappropriated	271,000	302,700
Treasury stock, at cost	(15,000) ---——— $715,000	(8,000) -———— $611,700

For 2020 Year

—————————————

Net income                  $63,300

Depreciation expense              22,000

Amortization of patents             5,000

Cash dividends declared and paid        25,000

Gain or loss on sale of patents         none

INSTRUCTIONS

Prepare a statement of cash flows for Smith Corporation for the year 2020. (Use the indirect method.)

Answer 1

Smith Corporation
Statement of Cash Flows
For the year ended December 31 2020
Particulars	Amount
Cash Flows from Operating Activities
Net Income	63300
Adjustments to reconcile net income to Net Cash flows from Operating Activities
Depreciation Expense	22000
Amortisation of Patents	5000
Increase in Account receivable	-13600
Decrease in Inventory	30000
Increase in prepaid Expenses	-700
Increase in Accounts Payable	6000
Decrease in Accrued Liabilities	-9000
Net Cash flows from operating activities	103000
Cash flows from Investing Activities
Purchase of land	-40000
Purchase of Buildings	-43000
Sale of patents	10000
Net Cash flows from Investing Activities	-73000
Cash flows from Financing Activities
Bonds Issued	75000
Dividends paid	-25000
Purchase of Treasury stock	-7000
Net cash flows from Financing Activities	43000
Net Change in Cash	73000
Add :Cash at the Beginning of the period	27000
Ending Cash Balance	100000