Question

The following balance sheets were taken from the records of Blalock Company:

Blalock Company

Comparative Balance Sheets

At December 31, 20X1 and 20X2

1		20X1	20X2
2	Assets
3	Cash	$150,000.00	$185,000.00
4	Accounts receivable	70,000.00	80,000.00
5	Investments	0.00	30,000.00
6	Plant and equipment	100,000.00	105,000.00
7	Accumulated depreciation	(30,000.00)	(32,000.00)
8	Land	20,000.00	30,000.00
9	Total assets	$310,000.00	$398,000.00
10	Liabilities and equity
11	Accounts payable	$40,000.00	$50,000.00
12	Bonds payable	60,000.00	0.00
13	Mortgage payable	0.00	50,000.00
14	Preferred stock	20,000.00	0.00
15	Common stock	100,000.00	160,000.00
16	Retained earnings	90,000.00	138,000.00
17	Total liabilities and equity	$310,000.00	$398,000.00

Additional transactions were as follows:

A.	Sold equipment costing $12,000, with accumulated depreciation of $9,000, for $2,000.
B.	Retired bonds at a price of $60,000 on December 31.
C.	Earned net income for the year of $68,000; paid cash dividends of $20,000.

Required:

Prepare a statement of cash flows using the worksheet approach. Use the indirect method to prepare the statement.

Answer 1

Cash Flow statement for year ended December 31, 20X2
Particulars	Amount in $	Working
Cash flows from operating activities
Net Income	68,000	Given
Adjustments to arrive cash flow from operating activities:
Depreciation expense	11,000	(32,000 + 9,000 - 30,000 )
Loss on sale of Equipment	1,000	(12,000 - 9,000 - 2,000 )
Increase in accounts receivables	-10,000	(70,000 - 80,000 )
Increase in accounts payable	10,000	( 50,000 - 40,000 )
Net Cash flow from operating activities	80,000
Cash flows from investing activities
Sale of Equipment	2,000	Given
Purchase of Plant & Equipment	-17,000	(105,000 + 12,000 - 100,000 )
Purchase of Land	-10,000	(20,000 - 30,000 )
Purchase of Investment	-30,000	Given
Net Cash flow from Investing activities	-55,000
Cash flows from financing activities
Proceeds from Issue of Common Shares	60,000	(160,000 - 100,000 )
Redemption of Preference Shares	-20,000	Given
Increase in Mortgage payable	50,000	Given
Retirement of Bond	-60,000	Given
Cash Dividend paid	-20,000	Given
Net Cash flows from financing activities	10,000
Net increase(decrease) in cash and cash equivalents (A)	35,000
Cash and cash equivalents at beginning of period (B)	150,000
Cash and cash equivalents at end of period =A+B	185,000
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