Question

The following information is available for the Perez Company:

Comparative Balance Sheets
	2017	2018
Cash	$800	$1,200
Accounts receivable	440	400
Inventory	740	1,220
Land	500	820
Equipment	4,140	4,400
Less:Accumulated depreciation	(620)	(800)
Total Assets	$6,000	$7,240
Accounts payable	$1,600	$1,000
Notes payable (long-term)	1,800	1,440
Common stock, no par	1,200	2,000
Retained earnings	1,400	2,800
Total Liabilities and Stockholders' Equity	$6,000	$7,240

Partial additional information:The net income for 2018 totaled $3,200. During 2018, the company sold for $780, equipment that cost $780 and had a book value of $600. The company sold land for $400, resulting in a loss of $80. The remaining change in the Land account resulted from the purchase of land through the issuance of common stock.

Required

Making whatever additional assumptions that are necessary, prepare a statement of cash flows for the company for 2018 using the indirect method.

Answer 1

Perez Company
Cash Flow Statement
For the ended december 31, 2018
Cash Flow from Operating Activities:
Net Income		$      3,200.00
Add: Adjustments
Gain on sale of Equipment	$     (180.00)
Loss on sale of land	$          80.00
Depreciation expense	$       180.00
Decrease in Accounts Payables	$     (600.00)
Decrease in Accounts receivables	$          40.00
Increase in Inventory	$     (480.00)
		$       (960.00)
A. Cash Flow from Operating Activities		$      2,240.00
Cash Flow from Investing Activities:
Sale of Equipment	$       780.00
Sale of Land	$       400.00
Purchase of Equipment	$     (860.00)
B. Cash flow from Investing Activities		$          320.00
Cash Flow from Financing Activities:
Repayment of notes payable	$     (360.00)
Dividend paid	$ (1,800.00)
C. Cash Flow from Financing Activities		$    (2,160.00)
Increase (Decrease) in cash [A+B+C]		$          400.00
Add: cash at the beginning of the year		$          800.00
Cash at the end of the year		$      1,200.00

Gross Opening balance of Equipment account	$   4,140.00
Less: Original value of Equipment sold during year	$       600.00
	$   3,540.00
Gross Closing balance of Equipment account	$   4,400.00
Equipment purchased	$       860.00

Calculation of dividend paid
Beginning balance of retained earnings	$        1,400.00
Add: Net income	$        3,200.00
	$        4,600.00
Less: Ending balance of Retained earnings	$        2,800.00
Dividends declared	$        1,800.00