Shown below are comparative balance sheets for Pearl Industries. Pearl Industries Comparative Balance Sheets December 31...

Shown below are comparative balance sheets for Pearl Industries.

Pearl Industries Comparative Balance Sheets December 31
Assets	2022		2021
Cash	$ 190,400		$ 61,600
Accounts receivable	246,400		212,800
Inventory	467,600		529,200
Land	224,000		280,000
Equipment	728,000		560,000
Accumulated depreciation—equipment	(184,800	)	(89,600	)
Total	$1,671,600		$1,554,000
Liabilities and Stockholders’ Equity
Accounts payable	$ 109,200		$ 120,400
Bonds payable	420,000		560,000
Common stock ($1 par)	604,800		487,200
Retained earnings	537,600		386,400
Total	$1,671,600		$1,554,000

Additional information:

1.		Net income for 2022 was $260,400.
2.		Depreciation expense was $95,200.
3.		Cash dividends of $109,200 were declared and paid.
4.		Bonds payable amounting to $140,000 were redeemed for cash $140,000.
5.		Common stock was issued for $117,600 cash.
6.		No equipment was sold during 2022.
7.		Land was sold for its book value.

Prepare a statement of cash flows for 2022 using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -45,000, or in parenthesis e.g. (45,000)).

Solutions

Expert Solution

Solution:

PEARL INDUSTRIES
Statement of Cash Flows [Indirect Method]
For Current Year Ended December 31, 2022
Cash flows from operating activities:
Net Income	$ 260,400
Adjustments to reconcile net income to net cash provided by operating:
Depreciation expense	$ 95,200
Changes in current operating assets and liabilities:
Increase in Account Receivable [212800-246400]	$ (33,600)
Decrease in Inventory [529200-467600]	$ 61,600
Decrease in accounts payable [109200-120400]	$ (11,200)
Net cash flows from operating activities		$ 372,400
Cash flow from[used for] investing activities:
Cash from sale of land [280000-224000]	$ 56,000
Cash used for purchase of equipment [560000-728000]	$ (168,000)
Net cash flow from investing activities (B)		$ (112,000)
Cash flow from [used for] financing activities:
Cash from sale of common stock	$ 117,600
Cash used for payment of bonds	$ (140,000)
Cash used for dividends	$ (109,200)
Net Cash flow from financing activities (C )		$ (131,600)
Net Increase in cash flow		$ 128,800
Cash balance at December 31, 2021		$ 61,600
Cash balance at December 31, 2022		$ 190,400

ekkarill92 answered 1 year ago

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