Question

Statement of Cash Flows—Indirect Method

The comparative balance sheet of Olson-Jones Industries Inc. for December 31, 20Y2 and 20Y1, is as follows:

		Dec. 31, 20Y2		Dec. 31, 20Y1
Assets
Cash		$182		$60
Accounts receivable (net)		103		75
Inventories		65		41
Land		148		167
Equipment		83		65
Accumulated depreciation-equipment		(22)		(11)
	Total Assets	$559		$397
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)		$70		$60
Dividends payable		11		-
Common stock, $1 par		37		19
Paid-in capital: Excess of issue price over par—common stock		86		46
Retained earnings		355		272
	Total liabilities and stockholders' equity	$559		$397

The following additional information is taken from the records:

1. Land was sold for $48.
2. Equipment was acquired for cash.
3. There were no disposals of equipment during the year.
4. The common stock was issued for cash.
5. There was a $120 credit to Retained Earnings for net income.
6. There was a $37 debit to Retained Earnings for cash dividends declared.

a. Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

Olson-Jones Industries Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y2
Cash flows from operating activities:
	$
Adjustments to reconcile net income to net cash flow from operating activities:
Changes in current operating assets and liabilities:
Net cash flow from operating activities		$
Cash flows from (used for) investing activities:
	$
Net cash flow from investing activities
Cash flows from (used for) financing activities:
	$
Net cash flow from financing activities
		$
Cash at the beginning of the year
Cash at the end of the year		$

b. Was Olson-Jones Industries Inc.’s net cash flow from operations more or less than net income?

Answer 1

Answer-a)-

OLSON-JONES INDUSTRIES INC.
STATEMENT OF CASH FLOWS (USING INDIRECT METHOD)
FOR THE YEAR ENDED 31 DECEMBER,20Y2
Particulars		Amount
		$
Cash flow from operating activities
Net Income		120
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation		11
Gain on sale of land		-29
Change in operating assets & liabilities
Increase in accounts receivable		-28
Increase in inventory		-24
Increase in accounts payable		10
Net cash flow from operating activities (a)		60
Cash Flow from Investing activities
New equipment purchased		-18
Land sold		48
Net cash Flow from Investing activities (b)		30
Cash Flow from Financing activities
Cash dividends paid	($37-$11)	-26
Common stock issued		58
Net cash Flow from Financing activities (c)		32
Net Change in cash c=a+b+c		122
Beginning cash balance		60
Closing cash balance		182

b)- Olson-Jones Industries Inc.’s net cash flow from operations was less than net income.