Question

INDIRECT METHOD - STATEMENT CASH FLOW

Using information below, Create a Statement of Cashflow (INDIRECT METHOD)

**Note: create the statement for the year of 2018 only.

Net Income from Income statement: $105,000.00

the Retained Earnings was $80,000.00

	2017	2018
Accounts Payable	$81,000	$66,000
Accounts Receivable	$110,000	$128,000
Accumulated Depreciation, PP&E	$290,000	$356,000
Cash and Cash Equivalents	$62,000	$54,000
Common Stock	$415,000	$425,000
Cost of Goods Sold	$359,000	$368,000
Depreciation Expense	$62,000	$66,000
Dividends	$20,000	$25,000
Income Tax Expense	$18,000	$23,000
Interest Expense	$44,000	$44,000
Inventory	$48,000	$55,000
Long-Term Notes Payable	$850,000	$810,000
Patents	$678,000	$712,000
PP&E	$875,000	$925,000
R&D Expense	$141,000	$135,000
Retained Earnings	$137,000	$217,000
Revenues	$845,000	$912,000
SG&A Expense	$158,000	$171,000

Answer 1

CASH FLOW STATEMENT

INDIRECT METHOD

FOR THE YEAR 2018

	$	$
Cash Flow from Operating Activities
Net Income	105000
Add: Non Cash Expenses (Depreciation)	66000
Add: Decrease in Current Assets (Nil)
Less: Increase in Current assets
Increase in A/cs Receivable	(18000)
Increase in Inventory	(7000)
(Add:) Increase in Current Liabilities (Nil)
(Less:) Decrease in Current Liabilities
Decrease in Accounts Payable	(15000)
Net Cash generated from operation (A)		131000
Cash Flow from Investing Activities
Purchase of Patents	(34000)
Purchase of PPE	(50000)
Net cash outflow from Investing Activities (B)		(84000)
Cash Flow from Financing Activities
Issue of common stock	10000
Payment of Dividend	(25000)
Payment of long term notes	(40000)
Net cash outflow from financing activities (C)		(55000)
Net Cash Generated / (Used) during the year (A+B+C)		(8000)
Add : Beginning cash balance		62000
Ending cash balance		54000

Working Notes:-

1. Amounts in ( ) are negative figures

2. Increase or decrease in items during the year is calculated by deducting beginning balance from the ending balance.

e. g. Decrease in Accounts Payable = Ending Balance - Beginning Balance = 81000 -66000 = $15000.

3. Accounts given in table regarding revenues and expenses are irrelevant as figure of net income is already given in question.

4. Dividend = Net Income - Retained earning = 105000 - 80000 = $25000