Question

The comparative balance sheet of Navaria Inc. for December 31, 20Y3 and 20Y2, is as follows:

1		Dec. 31, 20Y3	Dec. 31, 20Y2
2	Assets
3	Cash	$155,000.00	$150,000.00
4	Accounts receivable (net)	450,000.00	400,000.00
5	Inventories	770,000.00	750,000.00
6	Investments	0.00	100,000.00
7	Land	500,000.00	0.00
8	Equipment	1,400,000.00	1,200,000.00
9	Accumulated depreciation-equipment	(600,000.00)	(500,000.00)
10	Total assets	$2,675,000.00	$2,100,000.00
11	Liabilities and Stockholders’ Equity
12	Accounts payable	$340,000.00	$300,000.00
13	Accrued expenses payable	45,000.00	50,000.00
14	Dividends payable	30,000.00	25,000.00
15	Common stock, $4 par	700,000.00	600,000.00
16	Paid-in capital: Excess of issue price over par—common stock	200,000.00	175,000.00
17	Retained earnings	1,360,000.00	950,000.00
18	Total liabilities and stockholders’ equity	$2,675,000.00	$2,100,000.00

The income statement for the year ended December 31, 20Y3, is as follows:

1	Sales		$3,000,000.00
2	Cost of merchandise sold		1,400,000.00
3	Gross profit		$1,600,000.00
4	Operating expenses:
5	Depreciation expense	$100,000.00
6	Other operating expenses	950,000.00
7	Total operating expenses		1,050,000.00
8	Operating income		$550,000.00
9	Other income:
10	Gain on sale of investments		75,000.00
11	Income before income tax		$625,000.00
12	Income tax expense		125,000.00
13	Net income		$500,000.00

Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows:

A.	The investments were sold for $175,000 cash.
B.	Equipment and land were acquired for cash.
C.	There were no disposals of equipment during the year.
D.	The common stock was issued for cash.
E.	There was a $90,000 debit to Retained Earnings for cash dividends declared.

I have to prepare a statement of cash flows however my numbers for net operating and net financing are incorrect please help

Answer 1

Navaria Inc.
Statement of Cash Flows
For Year Ended December 31, 20Y3
Cash flows from operating activities
Net Income		500,000
Adjust to reconcile net income to cash basis
Net cash flow from operating activities
Depreciation expense	100,000
Gain on sale of investments	(75,000)
Change in current operating assets and liabilities
Increase in accounts receivable	(50,000)
Increase in inventories	(20,000)
Increase in accounts payable	40,000
Decrease in accrued expenses payable	(5,000)
		(10,000)
Net cash provided by operating activities		490,000
Cash flows from investing activities
Proceeds from the sale of investment	175,000
Purchase of land	(500,000)
Purchase of equipment	(200,000)
Net cash used by investing activities		(525,000)
Cash flows from financing activities
Issue of common stock	125,000
Payment of Dividends	(85,000)
Net cash provided by financing activities		40,000
Net Increase in cash		5,000
Cash at the beginning of the year		150,000
Cash at the end of the year		155,000