Question

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

1		Dec. 31, 20Y3	Dec. 31, 20Y2
2	Assets
3	Cash	$625,820.00	$586,050.00
4	Accounts receivable (net)	227,530.00	209,880.00
5	Inventories	641,480.00	616,920.00
6	Investments	0.00	240,910.00
7	Land	327,510.00	0.00
8	Equipment	704,830.00	554,110.00
9	Accumulated depreciation-equipment	(165,750.00)	(148,570.00)
10	Total assets	$2,361,420.00	$2,059,300.00
11	Liabilities and Stockholders’ Equity
12	Accounts payable	$424,970.00	$405,330.00
13	Accrued expenses payable	42,810.00	51,640.00
14	Dividends payable	23,200.00	19,840.00
15	Common stock, $4 par	158,000.00	98,000.00
16	Paid-in capital: Excess of issue price over par—common stock	417,900.00	280,700.00
17	Retained earnings	1,294,540.00	1,203,790.00
18	Total liabilities and stockholders’ equity	$2,361,420.00	$2,059,300.00

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

A.	The investments were sold for $280,020 cash.
B.	Equipment and land were acquired for cash.
C.	There were no disposals of equipment during the year.
D.	The common stock was issued for cash.
E.	There was a $186,520 credit to Retained Earnings for net income.
F.	There was a $95,770 debit to Retained Earnings for cash dividends declared.

Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. Use the minus sign to indicate cash outflows, decreases in cash and a net cash outflow for each section, if required.

Answer 1

Gain on Sale of Investment = Proceed from Sale of Investment - Cost of Investment sold
Gain on Sale of Investment = $280,020 - $240,910
Gain on Sale of Investment = $39,110

Proceed from Issue of Common Stock = Increase in Common Stock + Increase in Paid-in Capital
Proceed from Issue of Common Stock = ($158,000 - $98,000) + ($417,900 - $280,700)
Proceed from Issue of Common Stock = $197,200

Dividend paid = Dividends Payable, December 31, 20Y2 + Dividends declared - Dividends Payable, December 31, 20Y3
Dividend paid = $19,840 + $95,770 - $23,200
Dividend paid = $92,410