Question

The following information is available for Skysong Corporation for the year ended December 31, 2022:

Collection of principal on long-term loan to a supplier		$24,000
Acquisition of equipment for cash		19,500
Proceeds from the sale of long-term investment at book value		24,800
Issuance of common stock for cash		21,000
Depreciation expense		25,000
Redemption of bonds payable at carrying (book) value		31,000
Payment of cash dividends		7,700
Net income		33,400
Purchase of land by issuing bonds payable		43,000

In addition, the following information is available from the comparative balance sheet for Skysong at the end of 2022 and 2021:

		2022		2021
Cash		$158,800		$97,000
Accounts receivable (net)		28,200		16,000
Prepaid insurance		19,000		13,000
Total current assets		$206,000		$126,000
Accounts payable		$31,700		$21,000
Salaries and wages payable		6,900		7,600
Total current liabilities		$38,600		$28,600

Prepare Skysong's statement of cash flows for the year ended December 31, 2022, using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1

Solution

Skysong Corporation
Cash Flow Statement
For the Year Ended December 31, 2022
A. Cash Flows from Operating Activity
Net income		$           33,400.00
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense	$           25,000.00
Changes in current operating assets and liabilities:
Increase in Accounts receivables	$        (12,200.00)
Increase in Accounts payable	$           10,700.00
Increase in prepaid insurance	$           (6,000.00)
Increase in Salaries payable	$              (700.00)
		$           16,800.00
Net cash Provided by Operating activities		$           50,200.00
B. Cash flows from Investing Activities
Collection of loan from supplier	$           24,000.00
Sale of Investment	$           24,800.00
Purchase of Equipment	$        (19,500.00)
Net cash flow used for investing activities		$           29,300.00
C. Cash Flows from Financing activities
Cash received from issue of common stock	$           21,000.00
Retirement of bonds	$        (31,000.00)
Dividends paid	$           (7,700.00)
Cash flows provided by Financing activities		$        (17,700.00)
Net Increase (Decrease) in Cash [A+B+C]		$           61,800.00
Cash at the beginning		$           97,000.00
Cash at the end		$        158,800.00