Question

Required

Prepare a cash flow statement for 2014 with clear documentation (i.e., show your work) for each section of the statement.  Use either the direct or the indirect method.

Additional information

1.There were no write-offs of delinquent accounts during the year.

2.A building was sold during the year for $120.

V. (continued)

Comparative balance sheets and an income statement for 2014 are presented below for Nroklesah Company.

Nroklesah Company

Comparative Balance Sheets and Income Statement

For the Years 2013 and 2014

BALANCE SHEETS

Assets                                             2014     2013

Cash                                              $ 200    $ 285

Accounts receivable                                350      300

Allowance for bad debts                            (40)     (25)

Inventory                                          100      135

Land                                               600      500

Buildings                                          275      255

Accumulated depreciation-buildings                 (75)     (80)

Total assets                                     $1,410    $1,370

Liabilities & Owners’ Equity

Liabilities

Accounts payable                                  $ 300    $ 305

Wages payable                                       70       60

Dividends payable                                   30       25

Taxes payable                                       50       45

Long-term Bonds payable                            100      100

Premium on bonds payable                             7       10

Total liabilities                                  557      545

Owners’ Equity

Common stock                                      650      600

Retained earnings                                   203      225

Total owners’ equity                          853      825

Total liabilities & owners’ equity               $1,410   $1,370

INCOME STATEMENT (2008)

Revenue                                           $1,500

Cost of goods sold                                   850

Gross margin                                         650

Operating expenses

Wage expense                                 $171

Depreciation expense                          40

Bad debt expense                              15

Bond interest expense                         14

Total operating expenses                             240

Net operating income                                 410

Gain on sale of building                              60

Net income before tax                                470

Income tax                                           141

Net income after tax                               $ 329

Answer 1

Solution:

Nroklesah Company
Statement of Cash Flows (Indirect Method)
For year ended 2014
Particulars	Details	Amount
Cash Flow from Operating Activities:
Net Income	$329.00
Adjustments to reconcile net income to net cash provided by operations:
Depreciation Expense	$40.00
Bad debts expense	$15.00
Gain on sale of building	-$60.00
Premium on bond amortized ($10 - $7)	-$3.00
Increase in accounts receivables ($350 - $300)	-$50.00
Decrease in inventory ($135 - $100)	$35.00
Decrease in accounts payable ($305 - $300)	-$5.00
Increase in Wages payable ($70 - $60)	$10.00
Increase in Income tax payable ($50 - $45)	$5.00
Net Cash provided by operating activities		$316.00
Cash Flow from Investing Activities:
Sale of building	$120.00
Purchase of Land ($600 - $500)	-$100.00
Purchase of Building ($275 +$120 - $60 + $45 - $255)	-$125.00
Net Cash Provided by Investing activities		-$105.00
Cash Flow from Financing Activities:
Proceed from issue of common stock	$50.00
Dividend paid ($225 + $329 - $203 +$25 - $30)	-$346.00
Net Cash Provided by financing activities		-$296.00
Net Increase / (Decrease) in Cash		-$85.00
Cash balance at beginning of year		$285.00
Cash balance at end of year		$200.00