Question

Exercise 23-12

Condensed financial data of Sandhill Company for 2020 and 2019 are presented below.

SANDHILL COMPANY COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2020 AND 2019
		2020			2019
Cash		$1,780			$1,170
Receivables		1,760			1,280
Inventory		1,620			1,880
Plant assets		1,910			1,670
Accumulated depreciation		(1,210	)		(1,160	)
Long-term investments (held-to-maturity)		1,330			1,440
		$7,190			$6,280
Accounts payable		$1,230			$920
Accrued liabilities		210			250
Bonds payable		1,370			1,560
Common stock		1,920			1,680
Retained earnings		2,460			1,870
		$7,190			$6,280

SANDHILL COMPANY INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2020
Sales revenue		$6,820
Cost of goods sold		4,600
Gross margin		2,220
Selling and administrative expenses		910
Income from operations		1,310
Other revenues and gains
Gain on sale of investments		80
Income before tax		1,390
Income tax expense		540
Net income		850
Cash dividends		260
Income retained in business		$590

Additional information:

During the year, $70 of common stock was issued in exchange for plant assets. No plant assets were sold in 2020.

Prepare a statement of cash flows using the direct method.

Answer 1

Answer-

SANDHILL COMPANY
STATEMENT OF CASH FLOWS (USING DIRECT METHOD)
FOR THE YEAR ENDED DECEMBER 31,2020
Particulars		Amount
		$
Cash flow from operating activities
Cash Flow from Operating activities
Cash received from customers	($1280+$6820-$1760)	6340
Cash paid to suppliers	($4600+$1620-$1880+$920-$1230)	-4030
Cash paid for selling & administrative expenses	($910+$250-$210-50)	-900
Cash paid for income tax		-540
Net cash flow from operating activities (a)		870
Cash Flow from Investing activities
New equipment purchased		-170
Long-term investments sold		190
Net cash Flow from Investing activities (b)		20
Cash Flow from Financing activities
Cash dividends paid		-260
Common stock issued		170
Bonds payable paid		-190
Net cash Flow from Financing activities (c)		-280
Net Change in cash c=a+b+c		610
Beginning cash balance		1170
Closing cash balance		1780
Schedule of non cash investing & financing activities
Issuance of common stock for plant assets		$70