Question

Comparative balance sheet accounts of Sweet Company are presented below.

SWEET COMPANY COMPARATIVE BALANCE SHEET ACCOUNTS AS OF DECEMBER 31
Debit Balances		2020		2019
Cash		$69,600		$51,100
Accounts Receivable		156,500		130,000
Inventory		75,700		60,800
Debt investments (available-for-sale)		55,000		85,300
Equipment		69,600		47,800
Buildings		144,900		144,900
Land		39,600		25,200
Totals		$610,900		$545,100
Credit Balances
Allowance for Doubtful Accounts		$10,000		$8,000
Accumulated Depreciation—Equipment		20,800		14,100
Accumulated Depreciation—Buildings		37,000		27,900
Accounts Payable		66,500		59,800
Income Taxes Payable		11,900		10,000
Long-Term Notes Payable		62,000		70,000
Common Stock		310,000		260,000
Retained Earnings		92,700		95,300
Totals		$610,900		$545,100

Additional data:

1.		Equipment that cost $10,000 and was 60% depreciated was sold in 2020.
2.		Cash dividends were declared and paid during the year.
3.		Common stock was issued in exchange for land.
4.		Investments that cost $34,800 were sold during the year.
5.		There were no write-offs of uncollectible accounts during the year.

Sweet’s 2020 income statement is as follows.

Sales revenue					$955,000
Less: Cost of goods sold					601,700
Gross profit					353,300
Less: Operating expenses (includes depreciation expense and bad debt expense)					252,500
Income from operations					100,800
Other revenues and expenses
Gain on sale of investments		$15,000
Loss on sale of equipment		(2,900	)		12,100
Income before taxes					112,900
Income taxes					45,300
Net income					$67,600

(a) Compute net cash provided by operating activities under the direct method. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Net cash flow from operating activities

$

(b) 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

Solution :-

Sweet Company
Statement of Cash Flows-Direct Method
For the year ended December 31, 2020
Particulars	Amount ($)
Cash Flows from Operating Activities
Cash received from Accounts receivable	936,500.00
Cash Paid to Accounts Payable	-609,900.00
Cash Paid for Income Tax	-43,400.00
Net Cash flow used for operating activities	283,200.00

Sweet Company
Statement of Cash Flows-Indirect Method
For the year ended December 31,2020
Particulars	Amount
Cash Flows from Operating Activities
Net Income	$                67,600.00
Adjustments to reconcile net loss to net cash flow from operating activites
Add	Depreciation on Building	$                  9,100.00
Add	Depreciation on Equipment	$                12,700.00
Less	Gain on Sale of Investment	$              -15,000.00
Add	Loss on Sale of Equipment	$                  2,900.00
Changes in Current Assets & liabilities
Less	Increase in Accounts Receivables	$              -26,500.00
Less	Increase in Inventory	$              -14,900.00
Add	Increase in Allowance for Doubtful Accounts	$                  2,000.00
Add	Increase in Accounts Payable	$                  6,700.00
Add	Increase in Income Tax Payable	$                  1,900.00
Net Cash flow used for operating activities	$                46,500.00	A
Cash Flows from (Used for) Investing Activities
Add	Receipt from Sale of Equipment	1,100.00
Less	Payment for Debt Investment	-4,500.00
Less	Payment for Purchase of Equipment	-31,800.00
Add	Receipt from Sale of Debt Investment	49,800.00
Net Cash Flow used for Investing Activities	$                14,600.00	B
Cash Flows from (Used for) Financing Activities
Less	Payment of Long term note payable	$                -8,000.00
Less	Payment of Dividend	$              -70,200.00
Add	Receipt from Issue of Common Shares	$                35,600.00
Net Cash Flow from Financing Activities	$              -42,600.00	C
Net increase in cash and cash equilvalent during the year (A+B+C)	$                18,500.00
Add	Cash at the beginning of the year	$                51,100.00
	Cash at the end of the year	69,600.00