Question

Yoric Company listed the net changes in its balance sheet accounts for the past year as follows:

	Debits > Credits by:		Credits > Debits by:
Cash and cash equivalents	$	126,300
Accounts receivable		170,700
Inventory			$	84,500
Prepaid expenses				4,500
Long-term loans to subsidiaries				115,000
Long-term investments		99,000
Plant and equipment		273,000
Accumulated depreciation				65,200
Accounts payable				48,300
Accrued liabilities		5,300
Income taxes payable				9,700
Bonds payable				401,000
Common stock		121,000
Retained earnings				76,100
	$	799,800	$	799,800

  

The following additional information is available about last year’s activities:

1. Net income for the year was $    ?    .
2. The company sold equipment during the year for $35,100. The equipment originally cost $160,300 and it had $126,700 in accumulated depreciation at the time of sale.
3. Cash dividends of $11,000 were declared and paid during the year.
4. The beginning and ending balances in the Plant and Equipment and Accumulated Depreciation accounts are given below:

	Beginning		Ending
Plant and equipment	$	2,920,000	$	3,193,000
Accumulated depreciation	$	985,000	$	1,050,200

1. The balance in the Cash account at the beginning of the year was $109,600; the balance at the end of the year was $    ?    .
2. If data are not given explaining the change in an account, make the most reasonable assumption as to the cause of the change.

Required:

Using the indirect method, prepare a statement of cash flows for the year. (List any deduction in cash and cash outflows as negative amounts.)

Answer 1

Answer:-

CASH FLOW STATEMENT
Particulars		Amount (in $)
Net Income		87,100
Adjustments:
Depreciation	191,900
Increase in accounts receivable	(170,700)
Decrease in inventory	84,500
Increase in prepaid expenses	(4,500)
Increase in accounts payable	48,300
Decrease in accrued liabilities	(5,300)
Increase in income tax payable	9,700
Gain on sale of equipment	(1,500)
Total adjustment		152,400
Net cash flow from operating activities		239,500
Cash flow from investing activities
Sale of equipment	35,100
Purchase of equipment	(433,300)
Long term loans repaid by subsidiaries	115,000
Long term investments made	(99,000)
Net cash used in investing activities		(382,200)
Cash flow from financing activities
Issue of bonds payable	401,000
Issue/(Redemption) of common stock	(121,000)
Payment of dividend	(11,000)
Net cash flow from financing activities		269,000
Net Increase in cash		126,300
Add: beginning cash balance		109,600
Ending cash balance		235,900
Accumulated depreciation
		By balance b/d	985,000
Equipment	126,700
By Balance c/d	1,050,200	Depreciation expense(balancing fig.)	191,900
	1,176,900		1,176,900
Plant & Equipment
By balance b/d	2,920,000	accumulated depreciation	126,700
Gain onsale of equipment	1,500	Cash	35,100
Cash - purchase(balancing fig.)	433,300	By Balance c/d	3,193,000
	3,354,800		3,354,800
Working Note:-
Net Income for the year = Increase in retained earnings + dividend paid = $76,100 + $11000 = $87,100
The balance at the end of the year was = $109600 + $126300 = $235,900
Gain on sale of equipment:-
Written down value of equipment = 160,300-126,700 = 33,600
Gain on sale of equipment = 35,100-33,600 = 1,500