Question

The balance sheets for Kinder Company showed the following information. Additional information concerning transactions and events during 2020 are presented below.

Kinder Company

Balance Sheet

            December 31    

     2020                  2019

         Cash $ 30,900 $ 10,200

         Accounts receivable (net) 43,300 20,300

         Inventory 35,000 42,000

         Long-term investments 0 15,000

         Property, plant & equipment 236,500 150,000

         Accumulated depreciation     (37,700)              (25,000)

$308,000 $212,500

         Accounts payable $ 17,000           $ 26,500

         Accrued liabilities 21,000 17,000

         Long-term notes payable 70,000 50,000

         Common stock 130,000 90,000

         Retained earnings      70,000               29,000

$308,000 $212,500

Additional data:

1.   Net income for the year 2020, $61,000.

2. Gain on sale of investment, $18,000, included in net income.

3.   Paid a $40,000 long-term note payable by issuing common stock.

Prepare a Statement of Cash Flows for Kinder using the indirect method using Be sure to include required supplemental disclosures.

Answer 1

Answer:

Statement of cash flows
For the year ended December 31,2019
Cash flows from operating activities:
Net income		$61,000
Adjustments:
Depreciation Expense	$12,700
Gain on sale of investments	($18,000)
Increase in accounts receivable	($23,000)
Decrease in inventory	$7,000
Decrease in accounts payable	($9,500)
Increase in accrued liabilities	$4,000	($26,800)
Net cash flows from operating activities (i)		$34,200
Cash flows from investing activities:
Proceeds from sale of investment [15,000+18,000 gain]	$33,000
Purchase of property,plant & equipment	($86,500)
Net cash flows from investing activities (ii)		($53,500)
Cash flows from financing activities:
Proceeds from long term notes	$60,000
Cash paid for dividends	($20,000)
Net cash flows from financing activities (iii)		$40,000
Net increase(decrease) in cash (i+ii+iii)		$20,700
Cash balance, Dec 31 2019		$10,200
Cash balance, Dec 31 2020		$30,900

Calculations:

Long-term notes payable, 2020	$70,000
Redemption of loan by issuing common stock	$40,000
Long-term notes payable, 2019	($50,000)
Proceeds from long term notes	$60,000
Retained earnings, Dec 31 2019	$29,000
Net income	$61,000
Retained earnings, Dec 31 2020	($70,000)
Cash paid for dividends	$20,000