Question

Burns Corporation's net income last year was $92,800. Changes in the company's balance sheet accounts for the year appear below:

	Increases (Decreases)
Asset and Contra-Asset Accounts:
Cash and cash equivalents	$	21,300
Accounts receivable	$	13,400
Inventory	$	(17,600	)
Prepaid expenses	$	4,200
Long-term investments	$	11,000
Property, plant, and equipment	$	71,400
Accumulated depreciation	$	33,500
Liability and Equity Accounts:
Accounts payable	$	(18,400	)
Accrued liabilities	$	17,000
Income taxes payable	$	4,200
Bonds payable	$	(64,200	)
Common stock	$	43,200
Retained earnings	$	88,400

The company did not dispose of any property, plant, and equipment, sell any long-term investments, issue any bonds payable, or repurchase any of its own common stock during the year. The company declared and paid a cash dividend of $4,400.

Required:

a. Prepare the operating activities section of the company's statement of cash flows for the year. (Use the indirect method.)

b. Prepare the investing activities section of the company's statement of cash flows for the year.

c. Prepare the financing activities section of the company's statement of cash flows for the year.

Prepare the financing activities section of the company's statement of cash flows for the year. (Amounts to be deducted and cash outflows should be indicated with a minus sign.)

	Financing activities:

Answer 1

Answer-a)-

BURNS CORPORATION
STATEMENT OF CASH FLOWS (USING INDIRECT METHOD)
FOR THE YEAR ENDED 31
Particulars		Amount
		$
Cash flow from operating activities
Net Income		92800
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation expenses		33500
Change in operating assets & liabilities
Increase in accounts receivable		-13400
Decrease in inventory		17600
Increase in prepaid expenses		-4200
Decrease in accounts payable		-18400
Increase in accrued liabilities		17000
Increase in income taxes payable		4200
Net cash flow from operating activities (a)		129100

b)-

BURNS CORPORATION
STATEMENT OF CASH FLOWS (USING INDIRECT METHOD)
FOR THE YEAR ENDED 31
Particulars		Amount
		$

Cash Flow from Investing activities
New equipment purchased		-71400
Long-term investments purchased		-11000
Net cash Flow from Investing activities (b)		-82400

c)-

BURNS CORPORATION
STATEMENT OF CASH FLOWS (USING INDIRECT METHOD)
FOR THE YEAR ENDED 31
Particulars		Amount
		$

Cash Flow from Financing activities
Cash dividends paid		-4400
Common stock issued		43200
Bonds payable paid		-64200
Net cash Flow from Financing activities (c)		-25400

Explanation-

BURNS CORPORATION
STATEMENT OF CASH FLOWS (USING INDIRECT METHOD)
FOR THE YEAR ENDED 31
Particulars		Amount
		$
Cash flow from operating activities
Net Income		92800
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation expenses		33500
Change in operating assets & liabilities
Increase in accounts receivable		-13400
Decrease in inventory		17600
Increase in prepaid expenses		-4200
Decrease in accounts payable		-18400
Increase in accrued liabilities		17000
Increase in income taxes payable		4200
Net cash flow from operating activities (a)		129100
Cash Flow from Investing activities
New equipment purchased		-71400
Long-term investments purchased		-11000
Net cash Flow from Investing activities (b)		-82400
Cash Flow from Financing activities
Cash dividends paid		-4400
Common stock issued		43200
Bonds payable paid		-64200
Net cash Flow from Financing activities (c)		-25400
Net Change in cash c=a+b+c		21300