Question

Culver Inc., a greeting card company, had the following statements prepared as of December 31, 2020.

CULVER INC. COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2020 AND 2019
		12/31/20			12/31/19
Cash		$6,100			$7,000
Accounts receivable		62,200			51,500
Short-term debt investments (available-for-sale)		34,900			17,900
Inventory		40,300			60,500
Prepaid rent		5,000			3,900
Equipment		153,200			131,200
Accumulated depreciation—equipment		(35,000	)		(24,700	)
Copyrights		46,200			49,800
Total assets		$312,900			$297,100
Accounts payable		$46,000			$40,000
Income taxes payable		4,000			6,000
Salaries and wages payable		7,900			4,000
Short-term loans payable		8,100			10,100
Long-term loans payable		59,800			69,200
Common stock, $10 par		100,000			100,000
Contributed capital, common stock		30,000			30,000
Retained earnings		57,100			37,800
Total liabilities & stockholders’ equity		$312,900			$297,100

CULVER INC. INCOME STATEMENT FOR THE YEAR ENDING DECEMBER 31, 2020
Sales revenue				$336,150
Cost of goods sold				174,100
Gross profit				162,050
Operating expenses				120,800
Operating income				41,250
Interest expense		$11,400
Gain on sale of equipment		1,900		9,500
Income before tax				31,750
Income tax expense				6,350
Net income				$25,400

Additional information:

1.		Dividends in the amount of $6,100 were declared and paid during 2020.
2.		Depreciation expense and amortization expense are included in operating expenses.
3.		No unrealized gains or losses have occurred on the investments during the year.
4.		Equipment that had a cost of $20,200 and was 70% depreciated was sold during 2020.

Prepare a statement of cash flows 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

Answer-

CULVER INC.
STATEMENT OF CASH FLOWS (USING INDIRECT METHOD)
FOR THE YEAR ENDED DECEMBER 31,2020
Particulars		Amount
		$
Cash flow from operating activities
Net income		25400
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation		24440
Gain on sale of equipment		-1900
Amortization expense		3600
Change in operating assets & liabilities
Increase in Accounts receivable		-10700
Decrease in inventory		20200
Increase in prepaid rent		-1100
Increase in accounts payable		6000
Decrease in inome taxes payable		-2000
Increase in salaries & wages payable		3900
Net cash flow from operating activities (a)		67840
Cash Flow from Investing activities
New Equipment purchased		-42200
Old equipment sold		7960
Short-term debt investments purchased		-17000
Net cash Flow from Investing activities (b)		-51240
Cash Flow from Financing activities
Cash dividends paid		-6100
Short-term loans paid		-2000
Long-term loans paid		-9400
Net cash Flow from Financing activities (c)		-17500
Net Change in cash c=a+b+c		-900
Beginning cash balance		7000
Closing cash balance		6100