Question

I. Prepare a statement of cash flow on both a direct and indirect basis
		2017	2016	Change
Assets:
Cash		215,000	70,000	145,000
Accounts receivable, net		87,000	55,000	32,000
Inventory		74,000	60,000	14,000
Prepaid expenses		12,000	20,000	-8,000
Investments		70,000	80,000	-10,000
Property, plant & equipment		750,000	550,000	200,000
Accumulated depreciation		-90,000	-70,000	-20,000
Patents		6,000	10,000	-4,000
Total Assets		1,124,000	775,000	349,000
Liabilities & Equity
Accounts payable		37,000	50,000	-13,000
Accrued liabilities		26,000	40,000	-14,000
Taxes payable		18,000	4,000	14,000
Long-term Notes Payable		100,000	-
Common stock		200,000	200,000
Additional paid in capital		336,000	286,000	50,000
Retained earnings		407,000	195,000	212,000
Total liabilities and equity		1,124,000	775,000	349,000
Sales		1,450,000
Cost of goods sold		780,000
Gross profit		670,000
Operating expenses		290,000
Pre-tax Operating income		380,000
Gain on sale of investments		6,000
Gain on sale of equipment		4,000
Pre-tax income		390,000
Income taxes		78,000
Net income		312,000
a. Stock option expense of $50,000 was recognized in 2017
b. Equipment of $210,000 was purchased using $100,000 note payable and cash
c. Equipment with cost of $10,000 and book value of $5,000 was sold for $9,000
d. Investments with a cost of $10,000 were sold for $16,000

Answer 1

Cash Flow Statement INDIRECT Method

Particulars	Amount	Total Amount
Cash Flow from Operating Activities
Net Income	312,000
Add: Items for cash basis
Depreciation	25,000
Patent Amortization	4,000
Gain on sale of Equipment	(4,000)
Gain on sale of Investments	(6,000)
Accounts Receivable (Increase)	(32,000)
Inventory(Increase)	(14,000)
Prepaid Expenses(Decrease)	8,000
Accounts Payable (Decrease)	(13,000)
Accrued Liabilities (Decrease)	(14,000)
Income Tax Payable(Increase)	14,000
Cash Flow provided by operating activities		280,000
Cash Flow from Investing Activates
Sale of Equipment	9,000
Purchase of Equipment (only in cash)	(110,000)
Sale of Investments	16,000
Cash Used by Investing activity		(85,000)
Cash Flow from Financing Activity
Stock Expense	(50,000)
Cash provided by Financing activities		(50,000)
Changes in cash & Cash Equivalents		145,000
Cash at the Beginning of year		70,000
Cash at end of year		215,000

NOTE: Accumulated Depreciation

Particulars	Amount	Particulars	Amount
		Opening Balance	70,000
Sale of Equipment	5,000	Depreciation	25,000
Closing Balance	90,000