Question

Statement of Cash Flows (Indirect Method)
Arctic Company's income statement and comparative balance sheets as of December 31 of 2013 and 2012 follow:

ARCTIC COMPANY Income Statement For the Year Ended December 31, 2013
Sales Revenue		$946,400
Cost of Goods Sold	$694,200
Wages Expense	247,000
Advertising Expense	40,300
Depreciation Expense	28,600
Interest Expense	23,400
Gain on Sale of Land	(32,500)	1,001,000
Net Loss		$(54,600)

ARCTIC COMPANY Balance Sheets
	Dec. 31, 2013	Dec. 31, 2012
Assets
Cash	$63,700	$36,400
Accounts Receivable	54,600	65,000
Inventory	139,100	146,900
Prepaid Advertising	13,000	16,900
Plant Assets	468,000	288,600
Accumulated Depreciation	(101,400)	(72,800)
Total Assets	$637,000	$481,000
Liabilities and Stockholders' Equity
Accounts Payable	$22,100	$40,300
Interest Payable	7,800	-
Bonds Payable	260,000	-
Common Stock	318,500	318,500
Retained Earnings	67,600	122,200
Treasury Stock	(39,000)	-
Total Liabilities and Stockholders' Equity	$637,000	$481,000

During 2013, Arctic sold land for $91,000 cash that had originally cost $58,500. Arctic also purchased equipment for cash, acquired treasury stock for cash, and issued bonds payable for cash. Accounts payable relate to merchandise purchases.

Required
a. Calculate the change in cash that occurred during 2013.
b. Prepare a statement of cash flows using the indirect method.

a. Change in Cash during 2013 $Answer AnswerIncreaseDecrease

b. Use a negative sign with cash outflow answers.

Answer 1

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Arctic Company
Answer a	Amount $
Beginning cash balance	36,400.00
Less: Ending cash balance	63,700.00
Increase in cash balance	27,300.00

Workings- Indirect Method	Amount $
Decrease in Accounts Receivable
Closing Balance	54,600.00
Less: Opening Balance	65,000.00
Decrease in Accounts Receivable	(10,400.00)
Decrease in Inventory
Closing Balance	139,100.00
Less: Opening Balance	146,900.00
Decrease in Inventory	(7,800.00)
Decrease in Prepaid Advertising
Closing Balance	13,000.00
Less: Opening Balance	16,900.00
Decrease in Prepaid Advertising	(3,900.00)
Decrease in Accounts Payable
Closing Balance	22,100.00
Less: Opening Balance	40,300.00
Decrease in Accounts Payable	(18,200.00)
Increase in Interest Payable
Closing Balance	7,800.00
Less: Opening Balance	-
Increase in Interest Payable	7,800.00
Plant Assets purchased
Closing Balance	468,000.00
Add: Cost of land sold	58,500.00
Less: Opening Balance	288,600.00
Plant Assets purchased	237,900.00

Cashflow statement	Amount $	Amount $
Particulars
Net Loss		(54,600.00)
Adjustment to reconcile Net Income to Net Cash
Add:
Deprecation Expense		28,600.00
Less:
Gain on sale of land		32,500.00
Cash flow from Operations		(58,500.00)
Changes in Current Assets/Current Liabilities
Decrease in Accounts Receivable	10,400.00
Decrease in Inventory	7,800.00
Decrease in Prepaid Advertising	3,900.00
Decrease in Accounts Payable	(18,200.00)
Increase in Interest Payable	7,800.00	11,700.00
Net cash used by operating activities		(46,800.00)
Cash flow from investing activities
Land sold	91,000.00
Plant Assets purchased	(237,900.00)
Net cash used for investing activities		(146,900.00)
Cash flow from financing activities
Bonds Payable Issued	260,000.00
Treasury Stock purchased	(39,000.00)
Net cash provided by financing activities		221,000.00
Net Increase/(Decrease) in cash		27,300.00
Cash Balance, beginning		36,400.00
Cash Balance, ending		63,700.00