Question

The changes in each balance sheet account for Carver Corporation during the year just completed are as follows:

	Increase			Decrease
Cash and cash equivalents	$	3,270
Accounts receivable	$	5,450
Inventory				$	6,180
Prepaid expenses	$	3,180
Long-term investments				$	18,360
Property, plant, and equipment	$	11,770
Accumulated depreciation	$	9,540
Accounts payable				$	8,160
Accrued liabilities	$	5,400
Bonds Payable				$	12,840
Common Stock	$	3,240
Retained Earnings	$	5,960

Carver Corporation's income statement for the year just ended shows the following:

Income Statement
Sales	$	378,000
Cost of goods sold		201,400
Gross margin		176,600
Selling and administrative expense		170,640
Net income	$	5,960

The company did not dispose of any property, plant, and equipment, buy any long-term investments, issue any bonds payable, or repurchase any of its own common stock during the year. Carver Corporation uses the direct method to construct its statement of cash flows.

Required:

a. Determine the sales adjusted to the cash basis.

b. Determine the cost of goods sold adjusted to the cash basis.

c. Determine the selling and administrative expenses adjusted to a cash basis.

d. Determine the net cash provided by (used in) operating activities. (Negative amounts should be indicated by a minus sign.)

e. Determine the net cash provided by (used in) investing activities. (Negative amounts should be indicated by a minus sign.)

f. Determine the net cash provided by (used in) financing activities. (Negative amounts should be indicated by a minus sign.)

Answer 1

a.	Sales as per Income Statement	$3,78,000
	Less: Increase in Accounts receivable for the year	($5,450)
	Cash Sales	$3,72,550
b.	Cost of goods sold as per the Income Statement	$2,01,400
	Less: Decrease in inventory	($6,180)
	Less: Accounts payable decreased	$8,160
	Cost of goods sold against cash basis	2,03,380
c.	Selling & Administrative expenses as per Income Statement	$1,70,640
	Add: Prepaid Expenses	$3,180
	Less: Accrued liabilities	($5,400)
	Selling & Administrative expenses against cash basis	$1,68,420
d.	Net cash from Operating activities
	Cash from sales	$3,72,550
	Less: cash outflow cost of goods sold	(2,03,380)
	Selling & Administrative expenses against cash basis	($1,68,420)
	Depreciation	$9,540
	Net cash inflow from operating activities	$10,290
e.	Net cash from investing activities
	Sale of the long term investment	$18,360
	Purchase of property, plant, and equipment	($11,770)
f.	Net cash from financing activities
	Common stock issued	$3,240
	Bonds purchased repaid	($12,840)