Question

Statement of Cash Flows—Indirect Method

The comparative balance sheet of Tru-Built Construction Inc. for December 31, 2016 and 2015, is as follows:

		Dec. 31, 2016		Dec. 31, 2015
Assets
Cash		$208		$67
Accounts receivable (net)		119		84
Inventories		74		46
Land		170		191
Equipment		96		74
Accumulated depreciation-equipment		(26)		(13)
	Total Assets	$641		$449
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)		$81		$67
Dividends payable		13		-
Common stock, $10 par		42		21
Paid-in capital: Excess of issue price over par—common stock		101		53
Retained earnings		404		308
	Total liabilities and stockholders' equity	$641		$449

The following additional information is taken from the records:

Land was sold for $53.

Equipment was acquired for cash.

There were no disposals of equipment during the year.

The common stock was issued for cash.

There was a $138 credit to Retained Earnings for net income.

There was a $42 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.

Tru-Built Construction Inc.
Statement of Cash Flows
For the Year Ended December 31, 2016
Cash flows from operating activities:
Net income	$
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation
Gain on sale of land
Changes in current operating assets and liabilities:
Increase in accounts receivable
Increase in inventories
Increase in accounts payable
Net cash flow from operating activities		$
Cash flows from investing activities:
Cash received from sale of land	$
Less cash paid for purchase of equipment
Net cash flow provided by investing activities
Cash flows from financing activities:
Cash received from sale of common stock	$
Less cash paid for dividends
Net cash flow provided by financing activities
Increase in cash		$
Cash at the beginning of the year
Cash at the end of the year

Answer 1

Tru-Built Construction Inc.
Statement of Cash Flows
For the Year Ended December 31, 2016
Cash flows from operating activities:
Net income	$ 138.00
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation	$   13.00
Gain on sale of land	$ (32.00)
Changes in current operating assets and liabilities:
Increase in accounts receivable	$ (35.00)
Increase in inventories	$ (28.00)
Increase in accounts payable	$   14.00
Net cash flow from operating activities		$     70.00
Cash flows from investing activities:
Cash received from sale of land	$   53.00
Less cash paid for purchase of equipment	$ (22.00)
Net cash flow provided by investing activities		$     31.00
Cash flows from financing activities:
Cash received from sale of common stock	$   69.00
Less cash paid for dividends	$ (29.00)
Net cash flow provided by financing activities		$     40.00
Increase in cash		$   141.00
Cash at the beginning of the year		$     67.00
Cash at the end of the year		$     208.00

Dividend declared was $42 but dividend actually paid in cash is only $29 (we can see increase in dividend payable of $13)