Question

In: Accounting

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

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 $97 $31
Accounts receivable (net) 55 39
Inventories 35 22
Land 79 89
Equipment 45 34
Accumulated depreciation-equipment (12) (6)
Total Assets $299 $209
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors) $38 $31
Dividends payable 6 -
Common stock, $1 par 20 10
Paid-in capital: Excess of issue price over par—common stock 47 24
Retained earnings 188 144
Total liabilities and stockholders' equity $299 $209

The following additional information is taken from the records:

  1. Land was sold for $25.
  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 $64 credit to Retained Earnings for net income.
  6. There was a $20 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:
Net income $
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation
Loss on sale of land
Changes in current operating assets and liabilities:
Increase in accounts receivable
Net cash flow from operating activities $
Cash flows from (used for) investing activities:
$
Net cash flow from investing activities
Cash flows from (used for) financing activities:
$
Net cash flow from financing activities
$
Cash at the beginning of the year
Cash at the end of the year $

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

Solutions

Expert Solution

Answer-a)-

OLSON-JONES INDUSTRIES INC.
STATEMENT OF CASH FLOWS (USING INDIRECT METHOD)
FOR THE YEAR ENDED 31 DECEMBER,20Y2
Particulars Amount
$
Cash flow from operating activities
Net Income 64
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation 6
Gain on sale of land -15
Change in operating assets & liabilities
Increase in accounts receivable -16
Increase in inventory -13
Increase in accounts payable 7
Net cash flow from operating activities (a) 33
Cash Flow from Investing activities
New equipment purchased -11
Land sold 25
Net cash Flow from Investing activities (b) 14
Cash Flow from Financing activities
Cash dividends paid ($20-$6) -14
Common stock issued 33
Net cash Flow from Financing activities (c) 19
Net Change in cash c=a+b+c 66
Beginning cash balance 31
Closing cash balance 97

b)- Olson-Jones Industries Inc.’s net cash flow from operations was less than net income.


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