Question

Statement of Cash Flows—Indirect Method

The comparative balance sheet of Olson-Jones Industries Inc. for December 31, 20Y2 and 20Y1, is as follows:

		Dec. 31, 20Y2		Dec. 31, 20Y1
Assets
Cash		$183		$14
Accounts receivable (net)		55		49
Inventories		117		99
Land		250		330
Equipment		205		175
Accumulated depreciation—equipment		(68)		(42)
	Total assets	$742		$625
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)		$51		$37
Dividends payable		5		-
Common stock, $1 par		125		80
Paid-in capital: Excess of issue price over par—common stock		85		70
Retained earnings		476		438
	Total liabilities and stockholders' equity	$742		$625

The following additional information is taken from the records:

Land was sold for $120.

Equipment was acquired for cash.

There were no disposals of equipment during the year.

The common stock was issued for cash.

There was a $62 credit to Retained Earnings for net income.

There was a $24 debit to Retained Earnings for cash dividends declared.

a. Prepare a statement of cash flows, using the indirect method of presenting Cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

Olson-Jones Industries, Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y2
Cash flows from operating activities:
	$
Adjustments to reconcile net income to net cash flow from operating activities:
Changes in current operating assets and liabilities:
Net cash flow from operating activities		$
Cash flows from investing activities:
	$
Net cash flow from investing activities
Cash flows from financing activities:
	$
Net cash flow from financing activities
		$
Cash at the beginning of the year
Cash at the end of the year		$

b. Was Olson-Jones’s net cash flow from operations more or less than net income?

The source(s) of the difference are:

Gain on the sale of land

Purchase of equipment

Sale of common stock

Changes in current operating assets and liabilities

Depreciation expense

Dividends paid

Answer 1

Answer:

Olson Jones
Statement of cash flows
For the year ended December 31, 20Y2
Particulars	Amount($)	Amount($)
I. Cash flow from Operating Activities
Net income	62
Add: Non-cash and non-operating expenses and losses:
Depreciation on equipment	26
Operating profit before working capital changes		88
Add: Increase in current liabilities
Accounts payable(51-37)	14
Less:Increase in current assets
Accounts Receivable (55-49)	-6
Inventories (117-99)	-18
Dividend payable	5
Gain on sale of land (120- (330-250))	-40	-45
Net cash generated from Operating Activities		43
II. Cash flow from Investing Activities
Purchase of equipment	-30
Sale of Land	120
Net cash generated from Investing Activities		90
III. Cash flow from Financing Activities
Issue of common stock	60
Cash dividend paid	-24
Net cash generated from Financing Activities		36
Net increase in Cash and Cash Equivalents(I +II +III)		169
Add: Cash and cash equivalents in the beginning of the period		14
Cash and cash equivalents at the end of the period		183

Olson-Jones Industries Inc net cash flow from operations is less than net Income.The source(s) of the difference are Gain on the sale of land,Changes in current operating assets and liabilities and Depreciation expense.

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