Question

On the basis of the following data for Branch Co. for the current and preceding years ended December 31, prepare a statement of cash flows for the current year using the indirect method. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments. (Q.9)

Assume that equipment costing $125,000 was purchased for cash and the land was sold for $15,000. The stock was issued for cash and the only entries in the retained earnings account were for net income of $56,000 and cash dividends declared and paid of $18,000.

	Current year	Prior year
Assets
Cash	$65,000	$54,000
Accounts receivable (net)	78,000	85,000
Inventories	106,500	90,000
Land	-	20,000
Equipment	495,000	370,000
Accumulated depreciation	(215,000)	(158,000)
Total assets	$ 529,500	$461,000
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)	$53,500	$55,000
Common stock, $10 par	200,000	170,000
Paid-in capital in excess of par—common stock	62,000	60,000
Retained earnings	214,000	176,000
Total liabilities and stockholders' equity	$ 529,500	$461,000

Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

Branch Co.
Statement of Cash Flows
For Year Ended December 31
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 used for 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		$

Answer 1

  Branch Co.

Statement of Cash Flows

For Year Ended December 31 (Amounts in $)

Cash Flows from Operating Activities:
Net Income	56,000
Adjustments to reconcile net income to net cash flow from operating activities:
Add: Depreciation Expense (215,000-158,000)	57,000
Add: Loss on Sale of Land (20,000-15,000)	5,000
Changes in current operating assets and liabilities:
Add: Decrease in Accounts Receivable (85,000-78,000)	7,000
Less: Increase in Inventories (106,500-90,000)	-16,500
Less: Decrease in Accounts Payable (53,500-55,000)	-1,500
Net Cash Flows from Operating Activities (A)		107,000
Cash flows from Investing Activities:
Sale of Land	15,000
Purchase of Equipment	-125,000
Net Cash Flows Used for Investing Activities (B)		-110,000
Cash Flows from Financing Activities:
Issue of common Stock [(200,000-170,000)+(62,000-60,000)]	32,000
Cash Dividends Paid	-18,000
Net Cash Provided by Financing Activities (C)		14,000
Net Increase/(Decrease) in Cash (D = A+B+C)		11,000
Cash at the beginning of the year (E)		54,000
Cash at the end of the year (D+E)		65,000