Question

Statement of Cash Flows (Indirect Method)
Arctic Company’s income statement and comparative balance sheets as of December 31 of 2013 and 2012 follow:

ARCTIC COMPANY Income Statement For the Year Ended December 31, 2013
Sales Revenue		$728,000
Cost of Goods Sold	$534,000
Wages Expense	190,000
Advertising Expense	31,000
Depreciation Expense	22,000
Interest Expense	18,000
Gain on Sale of Land	(25,000)	770,000
Net Loss		$(42,000)

ARCTIC COMPANY Balance Sheets
	Dec. 31, 2013	Dec. 31, 2012
Assets
Cash	$49,000	$28,000
Accounts Receivable	42,000	50,000
Inventory	107,000	113,000
Prepaid Advertising	10,000	13,000
Plant Assets	360,000	222,000
Accumulated Depreciation	(78,000)	(56,000)
Total Assets	$490,000	$370,000
Liabilities and Stockholders’ Equity
Accounts Payable	$17,000	$31,000
Interest Payable	6,000	-
Bonds Payable	200,000	-
Common Stock	245,000	245,000
Retained Earnings	52,000	94,000
Treasury Stock	(30,000)	-
Total Liabilities and Stockholders’ Equity	$490,000	$370,000

During 2013, Arctic sold land for $70,000 cash that had originally cost $45,000. Arctic also purchased equipment for cash, acquired treasury stock for cash, and issued bonds payable for cash. Accounts payable relate to merchandise purchases.

Required
a. Calculate the change in cash that occurred during 2013.
b. Prepare a statement of cash flows using the indirect method.

a. Change in Cash during 2013 $Answer AnswerIncreaseDecrease

b. Use a negative sign with cash outflow answers.

ARTIC COMPANY Statement of Cash Flows For Year Ended December 31, 2013
Cash Flow from Operating Activities
Net Loss		Answer
Add (deduct) items to convert net income to cash basis
Depreciation		Answer
Gain on Sale of Land		Answer
Accounts Receivable	AnswerIncreaseDecrease	Answer
Inventory	AnswerIncreaseDecrease	Answer
Prepaid Advertising	AnswerIncreaseDecrease	Answer
Accounts Payable	AnswerIncreaseDecrease	Answer
Interest Payable	AnswerIncreaseDecrease	Answer
Cash Flow Used by Operating Activities		Answer
Cash Flow from Investing Activities
Sale of Land		Answer
Purchase of Plant Assets		Answer
Cash Used by Investing Activities		Answer
Cash Flow from Financing Activities
Issuance of Bonds Payable		Answer
Purchase of Treasury Stock		Answer
Cash Provided by Financing Activities		Answer
NetChange in Cash		Answer
Cash at Beginning of Year		Answer
Cash at End of Year

Answer 1

Answer-a)- Change in Cash during 2013 = $21000.

b)-

ARTIC COMPANY
STATEMENT OF CASH FLOWS (USING INDIRECT METHOD)
FOR THE YEAR ENDED DECEMBER 31,2013
Particulars		Amount
		$
Cash flow from operating activities
Net Loss		-42000
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation expense		22000
Gain on sale of land		-25000
Change in operating assets & liabilities
Decrease in Accounts receivable		8000
Decrease in inventory		6000
Decrease in prepaid advertising		3000
Decrease in accounts payable		-14000
Increase in interest payable		6000
Net cash flow from operating activities (a)		-36000
Cash Flow from Investing activities
Land sold		70000
New plant assets purchased		-183000
Net cash Flow from Investing activities (b)		-113000
Cash Flow from Financing activities
Treasury stock purchased		-30000
Bonds payable issued		200000
Net cash flow (used for) Financing activities (c)	170000
Net Change in cash c=a+b+c		21000
Beginning cash balance		28000
Closing cash balance		49000