Question

Use the following to answer questions 5 through 7:

The Smirnoff Corporation prepared the following comparative balance sheets at December 31, 2022 and 2021:

12/31/22 12/31/21

Cash $ 77,375 $ (22,955 )
Marketable securities 15,500 85,000
Accounts receivable 80,000 68,250
Inventory 165,000 145,000
Prepaid insurance 1,500 2,000
Land,buildings,and equipment 1,250,000 1,125,000
Accumulated depreciation (610,000 ) (572,000 )
Total assets $ 979,375 $ 830,295

Accounts payable $ 76,340 $ 102,760
Salaries payable 20,000 24,500
Notes payable 25,000 75,000
Bonds payable 200,000 0
Common stock 300,000 300,000
Retained earnings 358,035 328,035
Total liabilities and
shareholders' equity $ 979,375 $ 830,295

Additional information for the year ended December 31, 2022:

(1.) Sold available-for-sale securities costing $69,500 for $74,000.
(2.) Equipment costing $20,000, with a book value of $5,000, was sold for $6,000.
(3.) Issued 6% bonds payable at par.
(4.) Repaid a portion of a long term bank loan.
(5.) Purchased new equipment for $145,000 cash.
(6.) Paid cash dividends of $20,000.
(7.) Net income for 2022 was $50,000.
(8.) Smirnoff prepares its cash flows statement under the indirect method.

_____ 5. Net cash flows from operating activities on the cash flows statement for 2022 are?
A) Negative $17,670.
B) Positive $35,330.
C) Positive $39,830.
D) Negative $70,670.

_____ 6. Net cash flows from investing activities on the cash flows statement for 2022 are?
A) Negative $225,000.
B) Negative $65,000.
C) Negative $70,500.
D) Negative $145,000.

_____ 7. Net cash flows from financing activities on the cash flows statement for 2022 are?
A) Negative $130,000.
B) Positive $150,000.
C) Positive $130,000.
D) Negative $70,000.

Answer 1

Answer-5)- Net cash flows from operating activities on the cash flows statement for 2022 are = Positive $35330.

6)- Net cash flows from investing activities on the cash flows statement for 2022 are= Negative $65000.

7)- Net cash flows from financing activities on the cash flows statement for 2022 are = Positive $130000.

Explanation-

SMIRNOFF CORPORATION
STATEMENT OF CASH FLOWS (USING INDIRECT METHOD)
FOR THE YEAR ENDED DECEMBER 31,2022
Particulars		Amount
		$
Cash flow from operating activities
Net Income		50000
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation expenses		53000
Gain on sale of maketable securities	($74000-$69500)	-4500
Gain on sale of equipment	($6000-$5000)	-1000
Change in operating assets & liabilities
Increase in accounts receivable		-11750
Increase in inventory		-20000
Decrease in accounts payable		-26420
Decrease in salaries payable		-4500
Decrease in prepaid insurance		500
Net cash flow from operating activities (a)		35330
Cash Flow from Investing activities
New equipment purchased		-145000
Marketable securities sold		74000
Old equipment sold		6000
Net cash Flow from Investing activities (b)		-65000
Cash Flow from Financing activities
Cash dividends paid		-20000
Notes payable paid		-50000
Bonds payable issued		200000
Net cash Flow from Financing activities (c)		130000
Net Change in cash c=a+b+c		100330
Beginning cash balance		-22955
Closing cash balance		77375