Question

1. Statement of Cash Flows—Indirect Method

   The comparative balance sheet of Livers Inc. for December 31, 20Y3 and 20Y2, is shown as follows:

   		Dec. 31, 20Y3		Dec. 31, 20Y2
   Assets
   Cash		$300,080		$277,530
   Accounts receivable (net)		108,710		99,680
   Inventories		306,860		295,120
   Investments		0		114,340
   Land		157,400		0
   Equipment		338,580		260,920
   Accumulated depreciation—equipment		(79,270)		(70,360)
   	Total assets	$1,132,360		$977,230
   Liabilities and Stockholders' Equity
   Accounts payable (merchandise creditors)		$204,960		$192,510
   Accrued expenses payable (operating expenses)		20,380		25,410
   Dividends payable		11,320		8,800
   Common stock, $10 par		61,150		47,880
   Paid-in capital: Excess of issue price over par-common stock		229,870		132,900
   Retained earnings		604,680		569,730
   	Total liabilities and stockholders’ equity	$1,132,360		$977,230

   Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows:

   1. The investments were sold for $133,780 cash.
   2. Equipment and land were 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 $80,880 credit to Retained Earnings for net income.
   6. There was a $45,930 debit to Retained Earnings for cash dividends declared.

   Required:

   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.

   Livers Inc.
   Statement of Cash Flows
   For the Year Ended December 31, 20Y3
   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 investing activities:
   	$
   Net cash flow used for investing activities
   Cash flows from financing activities:
   	$
   Net cash flow from financing activities
   		$
   Cash at the beginning of the year
   Cash at the end of the year		$

Answer 1

Livers Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y3
Cash flows from operating activities:
Net income	$80,880
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense	$8,910
Gain on sale of investments	($19,440)
Changes in current operating assets and liabilities:
Increase in accounts receivable (net)	($9,030)
Increase in inventories	($11,740)
Incresae in accounts payable	$12,450
Decrese in accrued expenses payable	($5,030)
Net cash flow from operating activities (i)		$57,000
Cash flows from investing activities:
Sale of investments	$133,780
Purchase of land	($157,400)
Purchase of equipment	($77,660)
Net cash flow used for investing activities (ii)		($101,280)
Cash flows from financing activities:
Issuance of common stock	$110,240
Cash paid for dividends	($43,410)
Net cash flow from financing activities (iii)		$66,830
Net increase (decrease) in cash (i+ii+iii)		$22,550
Cash at the beginning of the year		$277,530
Cash at the end of the year		$300,080

Calculations:

Sale of price of investments		$133,780
Investments, Dec 31 20Y2	$114,340
Investments, Dec 31 20Y3	$0
Cost of sale of investments		$114,340
Gain on sale of investments		$19,440
Dividends payable, Dec 31 20Y2		$8,800
Debited to retained earnings		$45,930
Dividends payable, Dec 31 20Y3		($11,320)
Cash paid for dividends		$43,410