Question

Prepare a statement of cash flows for 2020 using the indirect method using the information below.

Pennant Corporation's end of year comparative balance sheets are presented below.

Pennant Corporation

Comparative Balance Sheets

December 31

                                                                                                                2020                                                                                                                 2019                                                                                                           

                        Cash                                                                            $ 15,200 $ 17,700

                        Accounts receivable                                                       25,200     22,300

                        Investments                                                                    20,000     16,000

                        Equipment                                                                      60,000     70,000

                        Accumulated depreciation                                          (14,000) (10,000)

                             Total                                                                       $106,400 $116,000

                        Accounts payable                                                       $ 14,600 $11,100

                        Bonds payable                                                                10,000 30,000

                        Common stock                                                              50,000    45,000

                        Retained earnings                                                          31,800     29,900

                            Total                                                                         $106,400                        $116,000

Additional information:

1.     Net income was $18,300. Dividends declared and paid were $16, 400.

2.     Equipment which cost $10,000 and had accumulated depreciation of $1,200 was sold for $3,300.

3.     All other changes in noncurrent account balances had a direct effect on cash flows, except the change in accumulated depreciation.

(you may use the form below or create your own)

Answer 1

Cash Flow Statement (Indirect Method)
Particulars	Amount	Amount
Net Income		$      18,300.00
Adjustments to reconcile net income to:
Net cash provided by operating activities
Depreciation (W.N)	$        5,200.00
Loss on sale of Equipment (W.N)	$        5,500.00
Increase in Accounts Receivable	$       (2,900.00)
Increase in Accounts Payable	$        3,500.00
Net Cash Generated		$      11,300.00
Net cash provided by operating activities	(A)	$      29,600.00
Cash Flows from Investing Activities
Sale of Equipment (W.N)	$        3,300.00
Purchase of Investment	$       (4,000.00)
Net cash provided by investing activities	(B)	$          (700.00)
Cash Flows from Financing Activities
Dividend Paid	$    (16,400.00)
Reduction in Bonds Payable	$    (20,000.00)
Increase in Common Stock	$        5,000.00
Net cash provided by Financing activities	(C')	$    (31,400.00)
Net increase/decrease in cash	(A+B+C')	$       (2,500.00)
Add:Opening cash balance		$      17,700.00
Closing cash balance		$      15,200.00

W.N
Equipment
Beg. Bal.	$    70,000.00	Disposal	$    10,000.00
		End. Bal.	$    60,000.00
	$   70,000.00		$   70,000.00
Accumulated Depreciation
Disposal	$      1,200.00	Beg. Bal.	$    10,000.00
End. Bal.	$    14,000.00	P/L	$      5,200.00
	$   15,200.00		$   15,200.00
Disposal
Equipment	$    10,000.00	Accu. Dep	$      1,200.00
		Loss on sale	$      5,500.00
		Cash (sale)	$      3,300.00
	$   10,000.00		$   10,000.00