Question

Problem 23-08

Comparative balance sheet accounts of Oriole Company are presented below.

ORIOLE COMPANY COMPARATIVE BALANCE SHEET ACCOUNTS AS OF DECEMBER 31
Debit Balances		2020		2019
Cash		$70,700		$50,900
Accounts Receivable		154,500		131,300
Inventory		75,000		61,600
Debt investments (available-for-sale)		55,200		84,600
Equipment		69,700		47,600
Buildings		144,200		144,200
Land		39,800		24,800
Totals		$609,100		$545,000
Credit Balances
Allowance for Doubtful Accounts		$9,900		$8,000
Accumulated Depreciation—Equipment		20,800		13,800
Accumulated Depreciation—Buildings		37,300		28,100
Accounts Payable		66,700		59,700
Income Taxes Payable		11,900		9,900
Long-Term Notes Payable		62,000		70,000
Common Stock		310,000		260,000
Retained Earnings		90,500		95,500
Totals		$609,100		$545,000

Additional data:

1.		Equipment that cost $9,900 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 $34,600 were sold during the year.
5.		There were no write-offs of uncollectible accounts during the year.

Oriole’s 2020 income statement is as follows.

Sales revenue					$951,100
Less: Cost of goods sold					603,200
Gross profit					347,900
Less: Operating expenses (includes depreciation expense and bad debt expense)					249,700
Income from operations					98,200
Other revenues and expenses
Gain on sale of investments		$15,000
Loss on sale of equipment		(3,100	)		11,900
Income before taxes					110,100
Income taxes					45,300
Net income					$64,800

(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.

Answer 1

Cash flow from operating activities (indirect method)

Collections from customers($951,100+$131,300-$154,500)	$927,900
Cash paid to supplers ($603,200+$59,700-$66,700+$75,000-$61,600)	($609,600)
Operating expenses paid ($249,700-$22,100-$1,940)	($225,660)
Interest expense paid($45,300+$9,900-$11,900)	($43,300)
Net cash provided by operating activities	$49,340

2. Cash flow statement (indirect method)

Cash flow from operating activities
Net income	$64,800
Adjustments to reconcile net income to net cash flow Operating activities
Depreciation expense- Equipment ($20,800-$13,800+$5,940)	$12,940
Depreciation expense- Buildings ($37,300-$28,100)	$9,200
Gain on sale of Investment	($15,000)
Loss on sale of Equipment	$3,100
Increase in accounts receivable ($154,500-$9,900-$131,300+$8,000)	($21,300)
Increase in inventory ($75,000-$61,600)	($13,400)
Increase in accounts payable ($66,700-$59,700)	$7,000
Decrease in Income tax payable($11,900-$9,900)	$2,000
Net cash provided by operating activities		$49,340
Cahs flow from Investing activities
Purchase of Investment ($55,200-$84,600+$34,600)	($5,200)
Sale of Investment ($34,600+$15,000)	$49,600
Purchase of Equipment ($69,700-$47,600+$9,900)	($32,000)
Sale of Equipment ($3,960-$3,100)	$860
Net cash provided by Investing activities		$13,260
Cash flow from Financing activities
Redemption of long term note payable ($70,000-$62,000)	($8,000)
Issuance of common stock ($310,000-$260,000-$15,000)	$35,000
Payment of cash dividends ($95,500-$90,500+$64,800)	($69,800)
Net cash provided by Financing activities		($42,800)
Net increase or decrease in cash		$19,800
Cash balance at the beginning		$50,900
Cash balance at the Ending		$70,700

Issuance of common stock for purchase of the land =$15,000.