Question

1. tatement of Cash Flows—Indirect Method

   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		$99		$32
   Accounts receivable (net)		57		40
   Inventories		35		22
   Land		81		88
   Equipment		46		35
   Accumulated depreciation-equipment		(12)		(6)
   	Total Assets	$306		$211
   Liabilities and Stockholders' Equity
   Accounts payable (merchandise creditors)		$39		$32
   Dividends payable		6		-
   Common stock, $1 par		20		10
   Paid-in capital: Excess of issue price over par—common stock		51		25
   Retained earnings		190		144
   	Total liabilities and stockholders' equity	$306		$211

   The following additional information is taken from the records:

   1. Land was sold for $18.
   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 $66 credit to Retained Earnings for net income.
   6. There was a $20 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 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 at the beginning of the year
   Cash at the end of the year		$

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

Answer 1

Statement of Cash Flows( Indirect Method)
Particulars	$
Net income	$66	Given
Less:Gain on Sale of Land (Note 1)	($11)
Add:Depreciation for Current Year	$6	($12-$6)
Changes in Current operating assets and liabilities
Less:Increase in Account Receivables	($17)	($57-$40)
Less:Increase in Inventory	($13)	($35-$22)
Add:Increase in Account Payables	$7	($39-$32)
Net cash flow from Operating activities	$38
Cash Flow from Investing Activities
Sale of Land	$18	Given
Purchase of Equipment	($11)	($46-$35)
Net cash flow investing activities	$7
Cash Flow from Financing Activities
Proceeds from issue of common stock	$36	($20+$51-$10-$25)
Dividend Paid(Note 2)	($14)
Net cash flow from Financing Activities	$22
Net cash flow of Olsen-Jones	$67
Cash at the beginning of the year	$32
Cash at the ending of the year	$99
Note 1:
Balance of Land on 31/12/2022	$81
Balance of Land on 31/12/2021	$88
Sale of Land	$18
Less: Decrease in Land	$7
Gain on sale of land	$11
Note 2:
Dividend Declared	$20
Less: Dividend payable balance on 31/12/2022	$6
Dividend Paid	$14

b) Net cash flow from operating activities = $ 38

Net income = $ 66

Hence net cash flow from operations is less than net income.