In: Accounting
Changes in Current Operating Assets and Liabilities—Indirect Method Victor Corporation's comparative balance sheet for current assets and liabilities was as follows:
Dec. 31, Year 2 | Dec. 31, Year 1 | |||
Accounts receivable | $20,000 | $16,700 | ||
Inventory | 70,000 | 78,700 | ||
Accounts payable | 7,700 | 9,400 | ||
Dividends payable | 27,000 | 25,000 |
Adjust net income of $111,900 for changes in operating assets and liabilities to arrive at net cash flow from operating activities.
b)
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Staley Inc. reported the following data:
Net income | $284,400 |
Depreciation expense | 67,900 |
Loss on disposal of equipment | 23,100 |
Increase in accounts receivable | 25,600 |
Increase in accounts payable | 11,100 |
Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.
Staley Inc. | ||||||||||||||
Statement of Cash Flows (partial) | ||||||||||||||
Cash flows from operating activities: | ||||||||||||||
Net income | $ | |||||||||||||
Adjustments to reconcile net income to net cash flow from operating activities: | ||||||||||||||
Depreciation | ||||||||||||||
Loss on disposal of equipment | ||||||||||||||
Changes in current operating assets and liabilities: | ||||||||||||||
Increase in accounts receivable | ||||||||||||||
Increase in accounts payable | ||||||||||||||
Net cash flow from operating activities |
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- c) Alpha Corporation purchased land for $210,000. Later in the year, the company sold a different piece of land with a book value of $111,000 for $97,000. How are the effects of these transactions reported on the statement of cash flows? Use the minus sign to indicate cash out flows, cash payments, decreases in cash and for any adjustments, if required. If a transaction has no effect on the statement of cash flows, select "No effect" from the drop down menu and leave the amount box blank.
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Answer a | |||||
Calculation of net cash flow from operating activities. | |||||
Net Income | $111,900 | ||||
Changes in operating assets and liabilities | |||||
Increase in accounts receivables | -$3,300 | ||||
Decrease in Inventory | $8,700 | ||||
Decrease in Accounts Payable | -$1,700 | ||||
Net Cash flow from Operating activities | $115,600 | ||||
Answer b | |||||
Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. | |||||
Staley Inc. | |||||
Statement of Cash flows (Partial) | |||||
Cash flows from operating activities: | |||||
Net Income | $284,400 | ||||
Adjustments to reconcile net income to net cash flow from operating activities: | |||||
Depreciation | $67,900 | ||||
Loss on disposal of equipment | $23,100 | ||||
Changes in current operating assets and liabilities: | |||||
Increase in accounts receivables | -$25,600 | ||||
Increase in accounts payable | $11,100 | ||||
Net Cash flows from Operating activities | $360,900 | ||||
Answer c | |||||
The effects of transactions reported on the statement of cash flows | |||||
Transaction | Action | Amount | |||
Gain or loss on sale of land | No effect | ||||
Cash received from sale of land | Inflow | $97,000 | |||
Cash paid for purchase of land | Outflow | -$210,000 | |||