Question

The comparative balance sheet of Olson-Jones Industries Inc. for December 31, 20Y2 and 20Y1, is as follows:

		Dec. 31, 20Y2		Dec. 31, 20Y1
Assets
Cash		$161		$53
Accounts receivable (net)		93		66
Inventories		58		36
Land		133		148
Equipment		75		57
Accumulated depreciation-equipment		(20)		(10)
	Total Assets	$500		$350
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)		$63		$53
Dividends payable		10		-
Common stock, $10 par		33		16
Paid-in capital: Excess of issue price over par—common stock		79		41
Retained earnings		315		240
	Total liabilities and stockholders' equity	$500		$350

The following additional information is taken from the records:

1. Land was sold for $38.
2. Equipment was acquired for cash.
3. There were no disposals of equipment during the year.
4. The common stock was issued for cash.
5. There was a $108 credit to Retained Earnings for net income.
6. There was a $33 debit to Retained Earnings for cash dividends declared.

a. Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

Olson-Jones Industries, Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y2
Cash flows from operating activities:
	$
Adjustments to reconcile net income to net cash flow from operating activities:
Changes in current operating assets and liabilities:
Net cash flow from operating activities		$
Cash flows from investing activities:
	$
Net cash flow provided by investing activities
Cash flows from financing activities:
	$
Net cash flow provided by financing activities
		$
Cash at the beginning of the year
Cash at the end of the year		$

b. Was Olson-Jones’s net cash flow from operations more or less than net income?

c. The source(s) of the difference are:

1. Gain on the sale of land
2. Purchase of equipment
3. Sale of common stock
4. Changes in current operating assets and liabilities
5. Depreciation expense
6. Dividends paid

Answer 1

Solution

Olson Jones Industries inc
Cash Flow Statement
For year ended 31st December 20Y2
A. Cash Flows from Operating Activity
Net Income	$            108.00
Adjustments to reconcile net income to
net cash flow from operating activities:
Depreciation expense	$              10.00
Gain on sale of Land	$            (23.00)
Changes in current operating assets and liabilities:
Increase in Accounts receivables	$            (27.00)
Increase in Inventory	$            (22.00)
Increase in accounts payable	$              10.00
Net cash flow from Operating activities		$                   56.00
B. Cash flows from Investing Activities
Sale of Land	$              38.00
Purchase of Equipment	$            (18.00)
Net cash flow used for investing activities		$                   20.00
C. Cash Flows from Financing activities
Issue of Common stock	$              55.00
Cash paid for dividends	$            (23.00)
Cash flows from Financing activities		$                   32.00
Net Increase (Decrease) in Cash [A+B+C]		$                 108.00
Cash at the beginning		$                   53.00
Cash at the end		$                 161.00

Requirement b

Net cash from operation was Less than net income.

Requirement c

Sources of differences are

a. Gain on the sale of land

d. Changes in current operating assets and liabilities

e. Depreciation expense