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		$161		$50
Accounts receivable (net)		91		63
Inventories		57		35
Land		131		143
Equipment		74		55
Accumulated depreciation-equipment		(20)		(10)
	Total Assets	$494		$336
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)		$62		$50
Dividends payable		10		-
Common stock, $1 par		33		16
Paid-in capital: Excess of issue price over par—common stock		85		39
Retained earnings		304		231
	Total liabilities and stockholders' equity	$494		$336

The following additional information is taken from the records:

Land was sold for $30.

Equipment was acquired for cash.

There were no disposals of equipment during the year.

The common stock was issued for cash.

There was a $106 credit to Retained Earnings for net income.

There was a $33 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.

Answer 1

Olson – Jones Industries Inc

Olson - Jones Industries Inc
Cash Flow Statement
For the Year Ended December 31, 20Y2
Cash Flow from Operating Activities:
Net Income		$106
Adjustments to reconcile net income to net cash flow:
Depreciation	$10
Gain on sale of land	($18)
Changes in Current Assets and Current Liabilities:
Increase in accounts receivable	($28)
Increase in inventories	($22)
Increase in Accounts Payable	$12	($46)
Cash Flow from Operating Activities:		$60
Cash Flow from Investing Activities:
Sale of Land	$30
Purchase of Equipment	($19)
Cash Flow from Investing Activities:		$11
Cash Flow from Financing Activities:
Issue of Common Shares	$63
Dividends paid	($23)	$40
Increase in cash		$111
Beginning Balance		$50
Ending Balance		$161

1. Depreciation expense =Accumulated Depreciation ending balance - Acc. Depreciation Beg. balance

= $20 - $10 = $10

1. Gain on sale of land –

Sale – book value of land

Book value of land sold = beg. Balance – ending balance = 143 – 131 = $12

Sale = $30

Gain on sale = 30 – 12 = $18

1. Purchase of equipment = ending balance – beg. Balance = 74 – 55 = $19
2. Total value of stock issue –

Par value = 33 – 16 = $17

Add: paid in capital – 85 – 39 = $46

Value of stock issue = 17 + 46 = $63

1. Dividends paid = dividends debited to retained earnings – dividends payable

= $33 - $10 = $23