Question

Comparative balance sheets: 2019 and 2020, an income statement for 2020 are provided below for Dandelion’s shop.

Balance Sheet

As of December 31^st

Assets	2020	2019
Cash	$1,550	$1,100
Account Receivable	550	1,200
Inventory	1,800	1,300
Investment – Trading Securities	970	970
Fair Value Adjustment	70	0
Property Plant & Equipment	12,000	10,800
Accumulated Depreciation – PPE	(4,650)	(5,400)
Goodwill	$400	$600
Total Assets	$12,690	$10,570
Liabilities
Accounts Payable	$200	$550
Accrued Wages	800	220
Convertible Bonds Payable	0	300
Bonds Payable	3,400	1,800
Discount on Bonds Payable	(10)	(12)
Total Liabilities	$4,390	$2,858
Stockholders’ Equity
Common Stock	4,300	3,100
Paid-in capital – Common Stock	300	100
Retained Earnings	3,700	4,512
Total Liability & Stockholders’ Equity	$12,690	$10,570

Income Statement

During the Year Ended December 31^st

Revenues	2020
Sales Revenue	$25,600
Dividend Revenue	110
Unrealized Holding Gain/Loss - Income	70
Total Net Sales		$25,780
Expenses
Cost of Goods Sold	$21,300
Operating Expenses	4,287
Interest Expense	45
Loss due to impairment of Goodwill	200
Loss on sale of Machinery	70
Total Expenses		25,902
Income Before Income Tax		(122)
Income Tax Expense		0
Net Income (Loss)		$ (122)

Additional Information from the 2020 accounting records:

1. Dandelion owns a 10% of Acorn Inc. which is labeled as a Trading Security that increased in market value during 2020. Acorn gave out $1,100 worth of dividends to all of its owners during 2020.

2. Machinery (part of the Plant Property and Equipment value) with an original cost of $1,000 was sold. Depreciation was calculated using the straight-line method and exactly 90% of its useful life was used up.

3. $1,600 worth of equipment was purchased by issuing a bond. All other Property, Plant, and Equipment purchases were made in cash.

4. Depreciation is included as part of Operating Expense.

5. 100% of Convertible bonds were exchanged for 100 shares of $1 par common stock.

Instructions:   Prepare the statement of cash flow under the indirect method. Your finished product should have all the information disclosed on a formal statement, including a list of noncash transactions.

***Please explain/show work how you got each amounts***

Answer 1

Statement of Cash Flows - Indirect Approach
	Amount in $	Amount in $
Net income		$                  -122
Cash flows from operating activities
Adjustments for reconcile the net income to:
Loss on sale of machinary	$                      70
Depreciation Expenses	$                   150
Unrealized gain or Losses	$                    -70
Amortization of Bond	$                        2
Loss due ti impairnment of Goodwill	$                   200
Decrease in account receivable	$                   650
Increase in inventory	$                  -500
Decrease on account payable	$                  -350
Increased in accrued wages	$                   580
		$                   732
Net cash from operating activities		$                   610
Cash flows from investing activities
Puchase of property plant & equipment in cash	$                  -600
Sale of Machinary	$                      30
Net cash used in investing activities		$                  -570
Cash flows from Financing activities
Issue of Common Stock in cash	$                1,100
Payment of cash dividend	$                  -690
Net cash used in financing activities		$                   410
Net increase in cash and cash equivalents		$                   450
Add :Cash and cash equivalents at beginning of period		$                1,100
Cash and cash equivalents at end of period		$                1,550