Question

Alex Company reported the following information for 2020.

Alex Company Comparative Balance Sheets December 31
Assets		2020		2019		Change Increase/Decrease
Cash		$59,000		$36,000		$23,000		Increase
Accounts receivable		62,000		22,000		40,000		Increase
Inventory		44,000		–0–		44,000		Increase
Prepaid expenses		6,000		4,000		2,000		Increase
Land		55,000		70,000		15,000		Decrease
Buildings		200,000		200,000		–0–
Accumulated depreciation—buildings		(21,000)		(14,000)		7,000		Increase
Equipment		183,000		68,000		115,000		Increase
Accumulated depreciation—equipment		(28,000)		(10,000)		18,000		Increase
Totals		$560,000		$376,000
Liabilities and Stockholders’ Equity
Accounts payable		$43,000		$40,000		$3,000		Increase
Accrued expenses payable		–0–		10,000		10,000		Decrease
Bonds payable		100,000		150,000		50,000		Decrease
Common stock ($1 par)		230,000		60,000		170,000		Increase
Retained earnings		187,000		116,000		71,000		Increase
Totals		$560,000		$376,000

Alex Company Income Statement For the Year Ended December 31, 2020
Sales revenue				$941,000
Cost of goods sold		$475,000
Operating expenses		231,000
Interest expense		12,000
Loss on disposal of plant assets		2,000		720,000
Income before income taxes				221,000
Income tax expense				65,000
Net income				$156,000

Additional information:

1.		Operating expenses include depreciation expense of $40,000.
2.		Land was sold at its book value for cash.
3.		Cash dividends of $85,000 were declared and paid in 2020.
4.		Equipment with a cost of $166,000 was purchased for cash. Equipment with a cost of $51,000 and a book value of $36,000 was sold for $34,000 cash.
5.		Bonds of $50,000 were redeemed at their face value for cash.
6.		Common stock ($1 par) of $170,000 was issued for cash.

Use this information to 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

Alex Company Statement of Cash Flow -Indirect Method   For the Year Ended December 31, 2020

Cash Flow From Operating Activities;
Net Income		$156,000
Adjustments to reconcile net income to Net Cash Provided by Operating Activities;
Adjustments for Non Cash Effects ;
Depreciation	$40,000
Loss on disposal of equipment	$2,000
Change in Operating Assets&Liabilities;
Increase in Accounts Receivable	$(40,000)
Increase in Merchandise Inventory	$(44,000)
Increase in Prepaid Expense	$(2,000)
Increase in Accounts Payable	$3,000
Decrease in Accrued Expenses Payable	$(10,000)	$(51,000)
Net Cash Flow From Operating Activities (a)		$105,000
Cash Flow From Investing Activities;
Equipment Purchased	$(166,000)
Equipment Sold	$34,000
Land Sold	$15,000
Net Cash Flow From Investing Activities (b)		$(117,000)
Cash Flow From Financing Activities;
Cash Dividends Paid	$(85,000)
Common Stock Issued	$170,000
Bonds Paid	$(50,000)
Net Cash Flow From Financing Activities (c)		$35,000
Net Change in Cash		$23,000
Beginning CashBalance		$36,000
Closing Cash Balance		$59,000