Question

he comparative balance sheets of Posner Company, for Years 1 and 2 ended December 31, appear below in condensed form:

	Year 2	Year 1
Assets
Cash	$ 53,000	$50,000
Accounts receivable (net)	37,000	48,000
Inventories	108,500	100,000
Investments	-	70,000
Equipment	573,200	450,000
Accumulated depreciation—equipment	(142,000)	(176,000)
Total assets	$629,700	$542,000
Liabilities and Stockholders' Equity
Accounts payable	$ 62,500	$43,800
Bonds payable, due Year 2	-	100,000
Common stock, $10 par	325,000	285,000
Paid-in capital in excess of par—common stock	80,000	55,000
Retained earnings	162,200	58,200
Total liabilities and stockholders' equity	$629,700	$542,000

The income statement for the current year is as follows:

Sales			$625,700
Cost of goods sold			340,000
Gross profit			$285,700
Operating expenses:
Depreciation expense	$ 26,000
Other operating expenses	68,000
Total operating expenses			94,000
Income from operations			$191,700
Other income:
Gain on sale of investment	$4,000
Other expense:
Interest expense	6,000		(2,000)
Income before income tax			$189,700
Income tax			60,700
Net income			$129,000

Additional data for the current year are as follows:

Fully depreciated equipment costing $60,000 was scrapped, no salvage, and new equipment was purchased for $183,200.

Bonds payable for $100,000 were retired by payment at their face amount.

5,000 shares of common stock were issued at $13 for cash.

Cash dividends declared and paid, $25,000.

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

Posner Company
Statement of Cash Flows
For the Year Ended December 31, Year 2
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 used for investing activities
Cash flows from financing activities:
	$
Net cash flow used for financing activities
		$
Cash at the beginning of the year
Cash at the end of the year		$

Answer 1

Cash flow from operating activities
Net income		129000
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense	26000
Gain on sale of investment	-4000
Changes in current operating assets and liabilities:
Decrease account receivable	11000
Increase inventory	-8500
Increase account payable	18700
		43200
Net cash flow from operating activities		172200
Cash flows from investing activities:
Gain on sale of investment	74000
Purchase equipment	-183200
Net cash used in investing activities		-109200
Cash flows from financing activities:
Repaid bonds payable	-100000
Issue common Stock	65000
Dividend paid	-25000
Net cash flow used for financing activities		-60000
Net cash increase (decrease)		3000
Cash at the beginning of the year		50000
Cash at the end of the year		53000