Question

Statement of Cash Flows (Indirect Method)
Use the following information regarding the Lund Corporation to (a) prepare a statement of cash flows using the indirect method and (b) compute Lund's operating-cash-flow-to-current-liabilities ratio.

Accounts payable increase	$13,500
Accounts receivable increase	6,000
Accrued liabilities decrease	4,500
Amortization expense	9,000
Cash balance, January 1	33,000
Cash balance, December 31	22,500
Cash paid as dividends	43,500
Cash paid to purchase land	135,000
Cash paid to retire bonds payable at par	90,000
Cash received from issuance of common stock	52,500
Cash received from sale of equipment	25,500
Depreciation expense	43,500
Gain on sale of equipment	6,000
Inventory decrease	19,500
Net income	114,000
Prepaid expenses increase	3,000
Average current liabilities	150,000

a. Use negative signs with cash outflow answers.

LUND CORPORATION Statement of Cash Flows For Year Ended December 31
Cash Flow from Operating Activities
Net Income	Answer
Add (deduct) items to convert net income to cash basis
Depreciation	Answer
Amortization	Answer
Gain on Sale of Equipment	Answer
Accounts Receivable Increase	Answer
Inventory Decrease	Answer
Prepaid Expenses Increase	Answer
Accounts Payable Increase	Answer
Accrued Liabilities Decrease	Answer
Cash Flow Provided by Operating Activities	Answer
Cash Flow from Investing Activities
Sale of Equipment	Answer
Purchase of Land	Answer
Cash Used by Investing Activities	Answer
Cash Flow from Financing Activities
Issuance of Common Stock	Answer
Retirement of Bonds Payable	Answer
Payment of Dividends	Answer
Cash Used by Financing Activities	Answer
Net Decrease in Cash	Answer
Cash at Beginning of Year	Answer
Cash at End of Year	Answer

b. Operating-cash-flow-to-current-liabilities ratio (Round answers to two decimal places.)

Answer

Answer 1

Answer-a)-

LUND CORPORATION
STATEMENT OF CASH FLOWS (USING INDIRECT METHOD)
FOR THE YEAR ENDED
Particulars		Amount
		$
Cash flow from operating activities
Net Income		114000
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Amortization expenses		9000
Depreciation expense		43500
Gain on sale of equipment		-6000
Change in operating assets & liabilities
Increase in accounts receivable		-6000
Decrease in inventory		19500
Increase in accounts payable		13500
Decrease in accrued liabilities		-4500
Increase in prepaid expenses		-3000
Net cash flow from operating activities (a)		180000
Cash Flow from Investing activities
Cash received from sale of equipment		25500
Investment purchased
Cash paid to purchase land		-135000
Net cash Flow from Investing activities (b)		-109500
Cash Flow from Financing activities
Common stock issued		52500
Cash paid to retire bonds		-90000
Cash dividends paid		-43500
Net cash Flow from Financing activities (c)		-81000
Net Change in cash c=a+b+c		-10500
Beginning cash balance		33000
Closing cash balance		22500

Answer- b)- Operating-cash-flow-to-current-liabilities ratio = Operating-cash-flow/ Average current-liabilities

= $180000/$150000

= 1.2 times