Question

Statement of Cash Flows—Indirect Method

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		$150		$48
Accounts receivable (net)		86		60
Inventories		54		33
Land		123		136
Equipment		69		52
Accumulated depreciation-equipment		(19)		(10)
	Total Assets	$463		$319
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)		$58		$48
Dividends payable		9		-
Common stock, $1 par		31		15
Paid-in capital: Excess of issue price over par—common stock		77		37
Retained earnings		288		219
	Total liabilities and stockholders' equity	$463		$319

The following additional information is taken from the records:

1. Land was sold for $33.
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 $100 credit to Retained Earnings for net income.
6. There was a $31 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
Gain on sale of land
Changes in current operating assets and liabilities:
Increase in accounts receivable
Increase in inventories
Increase in accounts payable
Net cash flow from operating activities		$
Cash flows from (used for) investing activities:
Cash from sale of land	$
Cash used for purchase of equipment
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?

Answer 1

a)

CASH FLOW STATEMENT

Olson-Jones industries inc.

Statement of cash flows for the year ended December 31,20Y2

CASH FLOW OPERATING ACTIVTIES	AMOUNT	AMOUNT
Net income	$100
deprection expense(19-10)	$9
Gain on sale of land	($20)
ADD:changes in current assets and liabilities
increase in acconts receivables(86-60)	($26)
increase in Inventories(54-33)	($21)
increase in account payables(58-48)	$10
NET CASH OF OPERATIVE ACTIVITIES		$52
Cash flows from investment activities
cash received on sale of land	$33
cash paid for purchase of equipment(69-52)	($17)
NET CASH OF INVESTMENT ACTIVITE		$16
cash flow of financing activities
cash received from issuance of stock(31-15+77-37)	$56
cash divident paid(31-9)	($22)
NET CASH FLOW OF FINANCING ACTIVITES		$34
net increase and decrease in cash and eq		$102
cash and cash equvilents at bedinning		$48
cash and cash equvilents at end of yr		$150

caluclation of gain on land

Balance at beginning =$123

balance at end =($136)

cost of land sold =($13)

value of sold land =$33

cost of land sold =($13)

Gain on land =$20

b)

Net cash flow from operating is less than net income

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