Question

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

BLOSSOM INC. COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2020 AND 2019
		12/31/20			12/31/19
Cash		$6,000			$6,900
Accounts receivable		61,800			50,900
Short-term debt investments (available-for-sale)		35,200			17,900
Inventory		40,300			60,600
Prepaid rent		5,100			3,900
Equipment		155,100			131,300
Accumulated depreciation—equipment		(35,200	)		(24,800	)
Copyrights		45,800			50,400
Total assets		$314,100			$297,100
Accounts payable		$45,600			$40,000
Income taxes payable		4,000			6,000
Salaries and wages payable		8,100			4,000
Short-term loans payable		7,900			10,000
Long-term loans payable		60,500			68,900
Common stock, $10 par		100,000			100,000
Contributed capital, common stock		30,000			30,000
Retained earnings		58,000			38,200
Total liabilities & stockholders’ equity		$314,100			$297,100

BLOSSOM INC. INCOME STATEMENT FOR THE YEAR ENDING DECEMBER 31, 2020
Sales revenue				$336,275
Cost of goods sold				173,300
Gross profit				162,975
Operating expenses				121,200
Operating income				41,775
Interest expense		$11,400
Gain on sale of equipment		2,000		9,400
Income before tax				32,375
Income tax expense				6,475
Net income				$25,900

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 $19,900 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

BLOSSOM INC.
Statement of Cash Flows
For the Year Ended December 31 2019
Cash flows from operating activities:
Net Income	$     25,900.00
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation (35200 - (24800 - 19900 x 70%)	$     24,330.00
Amotization Expenses of Copyrights	$       4,600.00
Gain on sale of equipment	$     (2,000.00)
Increase in Accounts Receivable	$   (10,900.00)
Decrease in Inventory	$     20,300.00
increase in prepaid rent	$     (1,200.00)
Inecrease in Accounts Payable	$5,600
Decrease in Income Tax Payable	($2,000)
Increase in Salaries and Wages Payabl	$4,100
Net cash provided by operating activities		$        68,730.00
Cash flows from  investing activities:
Sale of eqipment (19900 x (1-70%) + 2000	$       7,970.00
Purchases of equipment (155,100 – (131,300 – 19,900)]	$   (43,700.00)
Purchase of available for sale investment	$   (17,300.00)
Net cash used by investing activities		$       (53,030.00)
Cash Flows from Financing Activities:
Principal payment on short-term loan	$     (2,100.00)
Principal payment on long-term loan	$     (8,400.00)
Dividend payments	$     (6,100.00)
Net cash used by financing activities		$       (16,600.00)
Net decrease in cash		$            (900.00)
Cash, January 1, 2019		$6,900
Cash, December 31, 2019		$          6,000.00