Question

A Comparative Statement of Financial Position for Vivaldi Corporation is given below;

	Dec-31
Assets	2010	2009
Land	$71,000	$110,000
Equipment	270,000	200,000
Accumulated depreciation—equipment	-69,000	-42,000
Inventories	180,000	189,000
Accounts receivable	82000	66,000
Cash	63,000	22,000
Total	$597,000	$545,000
Equity and Liabilities
Share capital—ordinary ($1 par)	$214,000	$164,000
Retained earnings	199,000	134,000
Bonds payable	150,000	200,000
Accounts payable	34,000	47000
Total	$597,000	$545,000

Additional Information

1. Net Income for 2010 was $105000
2. Cash Dividend of $40000 were declared and paid
3. Bonds payable amounting to $50000 were retired.

Requirement:

Prepare Statement of Cash Flow for the year 2010.

Answer 1

Solution

Before making the Statement of Cash Flow, following workings shall be required,

Land
To Opening Balance	$ 110,000.00	By Sale of Land
		(Balancing Figure)	$ 39,000.00
		By Closing Balance	$ 71,000.00
	$ 110,000.00		$ 110,000.00
Equipment
To Opening Balance	$ 200,000.00
To Equipment Bought
(Balancing Figure)	$    70,000.00	By Closing Balance	$ 270,000.00
	$ 270,000.00		$ 270,000.00
Accumulated Depreciation - Equipment
		By Opening Balance	$    42,000.00
		By Depreciation
To Closing Balance	$    69,000.00	(Balancing Figure)	$    27,000.00
	$    69,000.00		$    69,000.00
Share Capital
		By Opening Balance	$ 164,000.00
		By Issue of Share
To Closing Balance	$ 214,000.00	(Balancing Figure)	$    50,000.00
	$ 214,000.00		$ 214,000.00
Retained Earnings
		By Opening Balance	$ 134,000.00
		By Transfer
To Closing Balance	$ 199,000.00	(Balancing Figure)	$    65,000.00
	$ 199,000.00		$ 199,000.00
Bonds Payable
To Bond Retired		By Opening Balance	$ 200,000.00
(Balancing Figure)	$    50,000.00
To Closing Balance	$ 150,000.00
	$ 200,000.00		$ 200,000.00

Along with that, following notes shall also be required,
1. Decrease of Inventory = $9,000
2. Increase of Accounts Receivable = $16,000
3. Decrease of Accounts Payable = $13,000

Now the statement of cash flow will be prepared as follows,

Particulars	Amount ($)	Amount ($)
Cash Flow from Operating Activities
Net Income	105,000
Adjustments for Net Income
Depreciation on Equipment	27,000
Cash Flow before Adjustments of Working Capital Changes	132,000
Adjustments for Working Capital Changes
Decrease in Inventory	9,000
Increase in Accounts Receivable	-16,000
Decrease in Accounts Payable	-13,000
NET CASH FLOW FROM OPERATING ACTIVITIES		112,000
Cash Flow from Investing Activities
Sale of Land	39,000
Purchase of Equipment	-70,000
NET CASH FLOW FROM INVESTING ACTIVITIES		-31,000
Cash Flow from Financing Activities
Issue of Equity Share	50,000
Retirement of Bonds	-50,000
Payment of Dividend	-40,000
NET CASH FLOW FROM FINANCING ACTIVITIES		-40,000
Net Cash Flow		41,000
Opening Balance of Cash		22,000
Closing Balance of Cash		63,000