Question

Statement of Cash Flows—Direct Method applied to PR 16-1A The comparative balance sheet of Navaria Inc. for December 31, 20Y3 and 20Y2, is as follows: Dec. 31, 20Y3 Dec. 31, 20Y2 Assets Cash $ 182,540 $ 171,780 Accounts receivable (net) 66,760 61,250 Inventories 188,170 180,930 Investments 0 70,400 Land 96,450 0 Equipment 205,640 161,920 Accumulated depreciation-equipment (48,800) (43,600) Total assets $690,760 $602,680 Liabilities and Stockholders' Equity Accounts payable $ 124,670 $ 118,730 Accrued expenses payable 12,540 15,670 Dividends payable 6,800 5,400 Common stock, $1 par 36,800 28,330 Paid-in capital: Excess of issue price over par-common stock 140,200 81,960 Retained earnings 369,750 352,590 Total liabilities and stockholders’ equity $690,760 $602,680 The income statement for the year ended December 31, 20Y3, is as follows: Sales $1,163,710 Cost of merchandise sold 715,680 Gross profit $ 448,030 Operating expenses: Depreciation expense $ 5,200 Other operating expenses 379,370 Total operating expenses 384,570 Operating income $ 63,460 Other income: Gain on sale of investments 11,800 Income before income tax $ 75,260 Income tax expense 30,100 Net income $ 45,160 Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows: The investments were sold for $82,200 cash. Equipment and land were acquired for cash. There were no disposals of equipment during the year. The common stock was issued for cash. There was a $28,000 debit to Retained Earnings for cash dividends declared. Required: Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments. Navaria Inc. Statement of Cash Flows For the Year Ended December 31, 20Y3 Cash flows from operating activities: $ Net cash flow from operating activities $ Cash flows from (used for) investing activities: $ Net cash flow used for 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 $

Answer 1

                                                       Statement of cash flows

                                            

Particulars	$	$
Cash flow from Operating Activities
Cash receipts from customers	1,158,200
Cash payment to suppliers	- 716,980
Cash payment for operating expenses	- 382,500
Cash payment for income tax	- 30,100
Net cash provided by Operating Activities		28,620
Cash flow from Investing Activities
Sale of investments	82,200
Purchase of property, plant and equipment	- 43,720
Purchase of Land	- 96,450
Net cash used in Investing Activities		- 57,970
Cash flow from Financing Activities
Issue of common stock	8,470
Additional paid in capital	58,240
Dividend paid	- 26,600
Net cash provided by Financing Activities		40,110
Net increase in Cash and Cash Equivalents(I +II +III)		10,760
Add: Cash in the beginning of the period		171,780
Cash at the end of the period		182,540

Cash receipts from customers = Revenue from sales + Decrease in accounts receivables

= 1,163,710 - (66,760 - 61,250)

= $1,163,710 - 5,510

= $1,158,200

Cash payment to suppliers = Cost of goods sold + Increase in inventory - Increase in accounts payable

= 715,680 + (188,170 - 180,930) - (124,670 - 118,730)

= 715,680 + 7,240 - 5,940

= $716,980

Cash payment for operating expenses = Operating expenses + Decrease in accrued expenses payable

= 379,370 + (15,670 - 12,540)

= $379,370 + 3,130

= $382,500

Cash payment for income tax = Income tax expense

= 30,100

Dividend paid = Dividend declared - Increase in dividend payable

= 28,000 - (6,800 - 5,400)

= 28,000 - 1,400

= $26,600