Question

1 A. Determining Net Income from Net The section of the statement of cash flows that reports the cash transactions affecting the determination of net income.Cash Flow from Operating Activities

Curwen Inc. reported net cash flow from operating activities of $357,500 on its statement of cash flows for the year ended December 31. The following information was reported in the Cash Flows from Operating Activities section of the A summary of the cash receipts and cash payments for a specific period of time, such as a month or a year.statement of cash flows, using the A method of reporting the cash flows from operating activities as the net income from operations adjusted for all deferrals of past cash receipts and payments and all accruals of expected future cash receipts and payments.indirect method:

Decrease in income taxes payable	$7,700
Decrease in inventories	19,140
Depreciation	29,480
Gain on sale of investments	13,200
Increase in accounts payable	5,280
Increase in prepaid expenses	2,970
Increase in accounts receivable	14,300

a.?Determine the net income reported by Curwen Inc. for the year ended December 31.
$ ___________________

B. The comparative balance sheet of Livers Inc. for December 31, 20Y3 and 20Y2, is shown as follows:

?		Dec. 31, 20Y3		Dec. 31, 20Y2
Assets		?		?
Cash		$230,570	?	$217,200	?
Accounts receivable (net)		83,530	?	78,010	?
Inventories		235,800	?	230,980	?
Investments		0	?	89,480	?
Land		120,940	?	0	?
Equipment		260,150	?	204,200	?
Accumulated depreciation—equipment		(60,910)	?	(55,070)	?
?	Total assets	$870,080	?	$764,800	?
?		?		?
Liabilities and Stockholders' Equity		?		?
Accounts payable (merchandise creditors)		$157,480	?	$150,670	?
Accrued expenses payable (operating expenses)		15,660	?	19,880	?
Dividends payable		8,700	?	6,880	?
Common stock, $10 par		46,980	?	37,480	?
Paid-in capital: Excess of issue price over par-common stock		176,630	?	104,010	?
Retained earnings		464,630	?	445,880	?
?	Total liabilities and stockholders’ equity	$870,080	?	$764,800	?

Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows:

The investments were sold for $104,690 cash.

Equipment and land were acquired for cash.

There were no disposals of equipment during the year.

The common stock was issued for cash.

There was a $54,700 credit to Retained Earnings for net income.

There was a $35,950 debit to Retained Earnings for cash dividends declared.

Required:

Prepare a statement of cash flows, using the indirect method of presenting The section of the statement of cash flows that reports the cash transactions affecting the determination of net income.cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

Livers Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y3
Cash flows from operating activities:	?	?
? Cash paid for dividends Cash paid for land Cash received from sale of investments Cash received from sale of common stock Loss on sale of investments Net income	$	?
Adjustments to reconcile net income to net cash flow from operating activities:	?	?
? Accumulated depreciation Cash paid for land Cash paid for dividends Cash received from sale of common stock Depreciation Retained earnings		?
? Cash paid for dividends Cash received from the sale of common stock Cash received from net income Gain on sale of investments Loss on sale of investments Retained earnings		?
Changes in current operating assets and liabilities:	?	?
? Decrease in accounts receivable Decrease in accounts payable Decrease in inventories Depreciation Increase in accounts receivable Loss on sale of investments		?
? Decrease in accounts payable Decrease in accounts receivable Decrease in inventories Gain on sale of investments Increase in accrued expenses Increase in inventories		?
? Decrease in accounts payable Decrease in accounts receivable Decrease in inventories Increase in accounts payable Increase in accrued expenses Loss on sale of investments		?
? Decrease in accounts payable Decrease in accrued expenses payable Decrease in dividends payable Depreciation Increase in accrued expenses payable Increase in land		?
Net cash flow from operating activities	?	$
Cash flows from investing activities:	?	?
? Cash received from gain on sale of investments Cash received from loss on sale of investments Cash received from net income Cash received from sale of common stock Cash received from sale of investments Cash received from retained earnings	$	?
? Cash paid for accounts payable Cash paid for accumulated depreciation Cash paid for common stock Cash paid for depreciation Cash paid for dividends Cash paid for purchase of land		?
? Cash paid for accounts receivable Cash paid for accrued expenses Cash paid for accumulated depreciation Cash paid for inventories Cash paid for purchase of equipment Cash paid for retained earnings		?
Net cash flow used for investing activities	?
Cash flows from financing activities:	?	?
? Cash received from net income Cash received from sale of common stock Cash received from sale of equipment Cash received from sale of inventories Cash received from sale of investments Cash received from retained earnings	$	?
? Cash paid for dividends Cash paid for inventories Cash paid for purchase of equipment Cash paid for purchase of investments Cash paid for purchase of land Cash paid for retained earnings		?
Net cash flow from financing activities	?
? Cash received from gain on sale of investments Cash received from loss on sale of investments Cash received from net income Cash received from sale of common stock Cash received from sale of investments Change in cash	?	$
Cash at the beginning of the year	?
Cash at the end of the year	?	$

Answer 1

Solution 1A:

Curwen Inc.
Statement of Cash Flows (Partial)
Particulars	Details	Amount
Cash Flow from Operating Activities:
Net Income (Bal Figure)	$341,770.00
Adjustments to reconcile net income to net cash provided by operations:
Depreciation	$29,480.00
Gain on sale of investment	-$13,200.00
Decrease in income taxes payable	-$7,700.00
Decrease in inventories	$19,140.00
Decrease in accounts payable	$5,280.00
Increase in prepaid expenses	-$2,970.00
Increase in accounts receivable	-$14,300.00
Net Cash provided by operating activities		$357,500.00

Hence net income for the year = $341,770

Solution 1B:

Statement of Cash Flows (Partial)
For year ended December 31, 20Y3
Particulars	Details	Amount
Cash Flow from Operating Activities:
Net Income	$54,700.00
Adjustments to reconcile net income to net cash provided by operations:
Depreciation Expense ($60,910 - $55,070)	$5,840.00
Gain on sale of investment ($104,690 - $89,480)	-$15,210.00
Increase in accounts receivables ($83,530 - $78,010)	-$5,520.00
Increase in inventory ($235,800 - $230,980)	-$4,820.00
Increase in accounts payable ($157,480 - $150,670)	$6,810.00
Decreae in accrued expenses payable ($19,880 - $15,660)	-$4,220.00
Net Cash provided by operating activities		$37,580.00
Cash Flow from Investing Activities:
Purchase of Equipment ($260,150 - $204,200)	-$55,950.00
Purchase of land	-$120,940.00
Sale of investment	$104,690.00
Net Cash Provided by Investing activities		-$72,200.00
Cash Flow from Financing Activities:
Proceed from issue of common stock ($46,980 + $176,630 - $37,480 - $104,010)	$82,120.00
Dividend Paid ($6,880 + $35,950 - $8,700)	-$34,130.00
Net Cash Provided by financing activities		$47,990.00
Net Increase / (Decrease) in Cash		$13,370.00
Cash balance at beginning of year		$217,200.00
Cash balance at end of year		$230,570.00