Question

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 in excess of 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:

1. Land was sold for $120.
2. Equipment was acquired for cash.
3. There were no disposals of equipment during the year.
4. The common stock was issued for cash.
5. There was a $62 credit to Retained Earnings for net income.
6. 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 (used for) 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 (used for) investing activities:
	$
Net cash flow from investing activities
Cash flows from (used for) financing activities:
	$
Net cash flow from financing activities
		$
Cash balance, January 1, 20Y2
Cash balance, December 31, 20Y2		$

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

The source(s) of the difference are:

1. Gain on the sale of land
2. Purchase of equipment
3. Sale of common stock
4. Changes in current operating assets and liabilities
5. Depreciation expense
6. Dividends paid

Answer 1

Solution

Olson- Jones Industries Inc.
Statement of cash flows
For year ended December 31 20Y2
A. Cash Flows from Operating Activity
Net Income	$          62.00
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation expense	$          26.00
Gain on sale of Land	$        (40.00)
Changes in Current operating assets and liabilities
Increase in Accounts receivables	$          (6.00)
Increase in Inventories	$        (18.00)
Increase in Accounts Payable	$          14.00
Net cash flow from Operating activities		$         38.00
B. Cash flows from Investing Activities
Sale of land	$        120.00
Purchase of Equipment	$        (30.00)
Net Cash flows from Investing activities		$         90.00
C. Cash Flows from Financing activities
Issuance of Common Stock	$          60.00
Payments of dividends	$        (19.00)
Cash flows from Financing activities		$         41.00
Net Increase (Decrease) in Cash [A+B+C]		$      169.00
Cash at the beginning		$         14.00
Cash at the end		$      183.00

Question b

Reasons are

(a) Gain on the sale of land

(d) Changes in current operating assets and liabilities

(E ) Depreciation expense