Denver, Inc. has prepared the following comparative balance sheets for 20x0 and 20x1:

20x1 20x0

Cash                                        75,000                         51,000
A/R                                         48,000                         39,000
Inventory                                54,000                         60,000
Prepaid Expense                     6,000                         9,000
Building                                440,000                       350,000
Accum. Depr.                      (145,000)                    (125,000)
Copyright                                51,000                         58,000
A/P                                          51,000                         56,000
Accrued Liabilities                 18,000                         14,000
Mortgage Payable                        -                            150,000
Preferred Stock                      175,000                             -
APIC – Pref.                           30,000                             -
Common Stock                      200,000                       200,000
R/E                                          55,000                        22,000

The R/E account has been charged for dividends of $54,000 and credited for the net income for the year.
The income statement for 20x1 is as follows:

Sales                           660,000
Cost of sales               363,000
Gross profit                297,000
Operating expenses    210,000
Net income                 87,000

From the information above, prepare a statement of cash flows for the year ended December 31, 20x1 (use the indirect method for operating activities). Make sure to prepare all activities.

Expert Solution

Denver Inc
Statement of Cash flows (Indirect Method)
Cash flows from Operating Activities
Net Income	87000
Adjustments to reconcile Net income to net cah provided by Operating Activities
Depreciation Expense	20000
Increase in Account Receivable	-9000
Decrease in Inventory	6000
Decrease in Prepaid Expense	3000
Decreasse in Accounts payable	-5000
Increase in Accrued Liabilities	4000
Net Cash flows from Operating Activities		106000

Cash flows from Investing Activities
Purchase of Building	-90000
Sale of Copy Rights	7000
Net Cash Flows from Investing Activities		-83000

Cash Flows from Financing Activities
Payment of Mortgage	-150000
Diviedend Paid	-54000
Issue of Preferred Stock	205000
Net cash provided by Financing Activities		1000
Net Change in Cash		24000
Add :Cash at the Beginning of the period		51000
Ending Cash Balance		75000

ekkarill92 answered 1 year ago

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