Question

1. On the basis of the following data for Breach Co. for the current and preceding years ended December 31, prepare a statement of cash flows using the indirect method. Assume that equipment costing $25,000 was purchased for cash and no long-term assets were sold during the period.

   Stock was issued for cash-3,200 shares at par.
   Net income for the current year was $76,000.
   Cash dividends declared and paid were $13,000.
   

   	Current Year	Prior Year
   Assets
   Cash	$ 170,000	$74,000
   Accounts Receivable (net)	78,000	85,000
   Inventories	106,500	90,000
   Equipment	395,000	370,000
   Accumulated Depreciation	(195,000)	(158,000)
   Total assets	$ 554,500	$461,000
   Liabilities and stockholders' equity
   Accounts Payable (merchandise creditors)	$51,000	$50,000
   Taxes Payable	2,500	5,000
   Common Stock, $10 par	262,000	230,000
   Retained Earnings	239,000	176,000
   Total Liabilities and Stockholders' Equity	$ 554,500	$461,000

   Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

   Breach Co.
   Statement of Cash Flows
   For Year Ended December 31
   Cash flows from operating activities:
   Cash paid for dividends Cash paid for purchase of equipment Cash received from sale of common stock Decrease in inventories Net income	$
   Adjustments to reconcile net income to net cash flow from operating activities:
   Cash paid for dividends Cash paid for purchase of equipment Cash received from sale of common stock Depreciation Decrease in inventories
   Changes in current operating assets and liabilities:
   Cash paid for dividends Cash paid for purchase of equipment Cash received from sale of common stock Decrease in accounts receivable Increase in taxes payable
   Cash paid for dividends Cash paid for purchase of equipment Cash received from sale of common stock Decrease in accounts payable Increase in accounts payable
   Cash paid for dividends Cash paid for purchase of equipment Cash received from sale of common stock Decrease in inventories Increase in inventories
   Cash paid for dividends Cash paid for purchase of equipment Cash received from sale of common stock Decrease in taxes payable Increase in taxes payable
   Net cash flow from operating activities		$
   Cash flows from investing activities:
   Cash paid for purchase of equipment Decrease in accounts receivable Decrease in taxes payable Decrease in inventories Depreciation	$
   Net cash flow used for investing activities
   Cash flows from financing activities:
   Cash received from sale of common stock Decrease in accounts receivable Decrease in taxes payable Decrease in inventories Depreciation	$
   Cash paid for dividends Increase in accounts payable Increase in accounts receivable Increase in inventories Net income
   Net cash flow provided by financing activities
   Decrease in cash Increase in cash		$
   Cash at the beginning of the year
   Cash at the end of the year		$

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Answer 1

	Statement of cash flow
	for the yearn ending Dec 31
	cash flow from operating activites
	net income					76000
	Adjustments to reconcile net income to
	net cash flow from operating activities
	Depreciation				37000
	change in current operating assets and
	liabilities
	decrease in accounts receivable				7000
	increase in inventories				-16500
	increase in accounts payable				1,000
	decrease in taxes payable				-2500	26,000
	net cash flow from operating activities					102000
	cash flow from investing actvitiy
	cash paid for purchase of Equipment				-25000
	net cash flow use for investing activitiy					-25000
	cash flow from financing activitiy
	cash received from sale of common stock				32,000
	cash paid for dividends				-13000
	net cash flow provided by financing activities					19,000
	increase in cash					96,000
	cash ath the beginning of the year					74,000
	cash at end of the year					170,000