Question

Given only, the following information, answer the questions below. Increases and Decreases represent the change from prior year to current year. (Note to you are not told what the change in cash was for the year.)

Decrease in Accounts Receivable 32,000

Increase in Inventory 5,000

Increase in Property Plant and Equipment 10,000

Increase in Long –Term Investments 50,000

Increase in Long-Term Bonds Payable 120,000

Decrease in Accounts Payable 15,000

Increase in Retained Earnings 127,000

Increase in Common Stock 18,000

Increase in Salaries Payable 12,000

Decrease in Prepaid Expenses 7,000

Increase in Unearned Revenue 11,000

Increase in Accumulated Depreciation 15,000

Decrease in Dividends Payable 3,000

Other Info: Equipment was sold in the current year with original cost of $12,000 and a book value of $8,000 for cash proceeds of $6,000. Assume the increase in Long-Term Investments was the purchase of shares of another company. The company declared a $10,000 cash dividend during the year.

a)What amount would be included on the statement of cash flows under “Cash flows from Operating Activities”? USE THE INDIRECT METHOD TO SOLVE. b)What amount would be included on the statement of cash flows under “Cash flows from Investing Activities”? c)What amount would be included on the statement of cash flows under “Cash flows from Financing Activities”?

Answer 1

Cost of equipment sold	$          12,000
Less: Accumulated Depreciation of equipment sold (12000-8000)	$            4,000
Book value of equipment sold	$            8,000
Less: Equipment sold	$            6,000
Loss on Sale of equipment	$            2,000
Increase in Accumulated Depreciation	$          15,000
Add: Accumulated Depreciation of equipment sold	$            4,000
Depreciation expense	$          19,000
Increase in Property Plant and Equipment	$          10,000
Add: Cost of equipment sold	$          12,000
Cost of Equipment Purchased	$          22,000
Increase in Retained Earnings	$        127,000
Add: Declared cash dividend	$          10,000
Net Income	$        137,000
Decrease in Dividends Payable	$            3,000
Add: Declared cash dividend	$          10,000
Dividend paid	$          13,000

Company Name
Statements of cash flow
For the year ended Month, Date, Year
Cash flows from Operating Activities
Net income		137,000
Adjustment to net income to reconcile operating cash flow
Depreciation expense	19,000
Loss on Sale of equipment	2,000
Decrease in Accounts Receivable	32,000
Increase in Inventory	(5,000)
Decrease in Prepaid Expenses	7,000
Decrease in Accounts Payable	(15,000)
Increase in Salaries Payable	12,000
Increase in Unearned Revenue	11,000
Net adjustment to net income		63,000
Net cash flow provided by operating activity		200,000
Cash flows from Investing Activities
Sales Proceeds of Equipment	6,000
Payment for Purchase of Property and Equipment	(22,000)
Payment for Purchase of Long terms Investment	(50,000)
Net cash flow used by Investing activity		(66,000)
Cash flows from Financing Activities
Dividend Paid	(13,000)
Cash received from the issue of common stock	18,000
Cash received from the issue of Long-Term Bonds Payable	120,000
Net cash flow provided by Financing activity		125,000
Increase in cash		259,000