Question

Exercise 23-12

Condensed financial data of Vaughn Company for 2020 and 2019 are presented below.

VAUGHN COMPANY COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2020 AND 2019
		2020			2019
Cash		$1,790			$1,140
Receivables		1,750			1,290
Inventory		1,590			1,900
Plant assets		1,920			1,740
Accumulated depreciation		(1,170	)		(1,150	)
Long-term investments (held-to-maturity)		1,320			1,420
		$7,200			$6,340
Accounts payable		$1,220			$880
Accrued liabilities		200			250
Bonds payable		1,400			1,530
Common stock		1,940			1,700
Retained earnings		2,440			1,980
		$7,200			$6,340

VAUGHN COMPANY INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2020
Sales revenue		$6,770
Cost of goods sold		4,660
Gross margin		2,110
Selling and administrative expenses		930
Income from operations		1,180
Other revenues and gains
Gain on sale of investments		80
Income before tax		1,260
Income tax expense		540
Net income		720
Cash dividends		260
Income retained in business		$460

Additional information:

During the year, $70 of common stock was issued in exchange for plant assets. No plant assets were sold in 2020.

Prepare a statement of cash flows using the direct method.

Answer 1

Answer-

VAUGHN COMPANY
STATEMENT OF CASH FLOWS (USING DIRECT METHOD)
FOR THE YEAR ENDED DECEMBER 31,YEAR 2020
Particulars		Amount
		$
Cash Flow from Operating activities
Cash received from customers	($6770+$1290-$1750)	6310
Cash paid to suppliers	($4660+$1590-$1900+$880-$1220)	-4010
Cash paid for selling & administrative expenses	($930+$250-$200-$20)	-960
Cash paid for income taxes		-540
Net cash Flow from Operating activities		800
Cash Flow from Investing activities
New plant assets purchased		-110
Long-term invetsments sold		180
Net cash Flow from Investing activities (b)		70
Cash Flow from Financing activities
Cash dividends paid		-260
Common stock issued		170
Bonds payable paid		-130
Net cash Flow from Financing activities (c)		-220
Net Change in cash c=a+b+c		650
Beginning cash balance		1140
Closing cash balance		1790
Schedule of non cash investing & financing activities
Plant assets purchased by issuing common stock		70