Question

The following are relevant account balances from Lux Corp’s comparative balance sheet and 2019 income statement.

Lux Corp’s balance sheets:

	December 31, 2019	January 1, 2019
Cash	$    6,000	$     9,000
Accounts receivable	8,000	12,000
Merchandise inventory	29,000	18,000
Prepaid rent	6,000	4,000
Equipment	100,000	80,000
Accumulated depreciation	(28,000)	(13,000)
Total assets	$121,000	$110,000
Accounts payable	$    9,000	$   25,000
Unearned Revenue	6,000	4,000
Common stock	38,000	32,000
Retained earnings	68,000	49,000
Total liabilities and shareholders’ equity	$121,000	$110,000

Other information: No equipment was sold or retired during 2019. Lux’s net income for 2019 was $33,000.

Prepare the statement of cash flow for 2019.

Answer 1

Lux Corp's
Statement of cash flows
For the year ended Dec 31,2019
Particulars	Amt. $	Workings
Cash flows from operating activities
Net income before taxes	33000
Adjustments for non cash effects:
Depreciation expense	15000	28000-13000
Change in operating assets and liabilities:
Decrease in accounts receivable	4000	12000-8000
Increase in prepaid rent	-2000	4000-6000
Increase in inventory	-11000	18000-29000
Increase in unearned revenue	2000	6000-4000
Decrease in accounts payable	-16000	9000-25000
Net cash flow from operating activities	25000
Cash flows from investing activities
Purchase of equipment	-20000	80000-100000
Net cash flow from investing activities	-20000
Cash flows from financing activities
Cash dividends paid	-14000	68000-49000-33000
Issuance of common stock	6000	38000-32000
Net cash flow from financing activities	-8000
Net Increase (decrease) in cash	-3000
Cash at the beginning of the period	9000
Cash at the end of the period	6000