Question

The operations of the Hamilton Hotel, a small hotel operation, are becoming more complex. Alexander Hamilton, the owner, has asked for your help in preparing his statement of cash flows. He is able to present you with balance sheets and some additional information.

Hamilton Hotel
Balance Sheets
December 31, 2015 and December 31, 2016
Assets	2015	2016	Change
Cash	10,000	6,000	(4,000)
Accounts Receivable	56,500	45,500	(11,000)
Inventory	6,000	6,000	-0-
Investments	20,000	25,000	5,000
Building & Equipment	2,200,000	2,325,000	125,000
Accumulated Depreciation	(200,000)	(250,000)	50,000
Total Assets	2,092,500	2,157,500	65,000
Liabilities & Stockholder's Equity
Accounts Payable	18,000	21,000	3,000
Salaries Payable	5,000	2,000	(3,000)
Interest Payable	1,000	4,000	3,000
Mortgage Payable (current)	55,000	55,000	-0-
Dividends Payable	25,000	25,000	-0-
Note Payable	-0-	40,000	40,000
Mortgage Payable (Long Term)	1,575,000	1,520,000	(55,000)
Common Stock	200,000	300,000	100,000
Retained Earnings	213,500	190,500	23,000
Total Liabilities & Stockholders’ Equity	2,092,500	2,157,500	65,000

Additional information:

1. Equipment costing $20,000, depreciated to $10,000 was sold for $8,000.
2. An investment costing $5,000 was sold for $8,000
3. Equipment was purchased for $145,000.
4. Dividends declared during 2016 totaled $50,000.
5. Assume only dividends declared and net income affected the retained earnings account
6. Assume all current liabilities are paid on a timely basis
7. Assume that the current amount of the mortgage payable was reclassified from the noncurrent mortgage

Prepare a cash flow statement in proper format for Alexander

Answer 1

Answer-

ALEXANDER HAMILTON
STATEMENT OF CASH FLOWS (USING INDIRECT METHOD)
FOR THE YEAR ENDED DECEMBER 31,2016
Particulars		Amount
		$
Cash flow from operating activities
Net Income		27000
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation		50000
Loss on sale of land	($10000-$8000)	2000
Gain on sale of investment	($8000-$5000)	-3000
Change in operating assets & liabilities
Decrease in accounts receivable		11000
Increase in accounts payable		3000
Decrease in salaries payable		-3000
Increase in notes payable		3000
Net cash flow from operating activities (a)		90000
Cash Flow from Investing activities
Equipment purchased		-145000
Equipment sold		8000
Investment sold		8000
Net cash Flow from Investing activities (b)		-129000
Cash Flow from Financing activities
Cash dividends paid		-50000
Notes payable issued		40000
Mortgage payable paid		-55000
Common stock issued		100000
Net cash Flow from Financing activities (c)		35000
Net Change in cash c=a+b+c		-4000
Beginning cash balance		10000
Closing cash balance		6000