Question

Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows:

	Ending Balance			Beginning Balance
Cash	$	121,800		$	146,550
Accounts receivable		95,900			103,400
Inventory		128,800			117,500
Total current assets		346,500			367,450
Property, plant, and equipment		339,000			329,000
Less accumulated depreciation		113,000			82,250
Net property, plant, and equipment		226,000			246,750
Total assets	$	572,500		$	614,200
Accounts payable	$	75,200		$	133,500
Income taxes payable		58,300			80,200
Bonds payable		141,000			117,500
Common stock		164,500			141,000
Retained earnings		133,500			142,000
Total liabilities and stockholders’ equity	$	572,500		$	614,200

During the year, Ravenna paid a $14,100 cash dividend and it sold a piece of equipment for $7,050 that had originally cost $16,800 and had accumulated depreciation of $11,200. The company did not retire any bonds or repurchase any of its own common stock during the year.

l. What is the amount of net cash provided by (used in) operating activities in the company’s statement of cash flows?

m.What is the amount of gross cash outflows reported in the investing section of the company’s statement of cash flows?

n.What is the company’s net cash provided by (used in) investing activities?

o.What is the amount of gross cash inflows reported in the financing section of the company’s statement of cash flows?

p.What is the company’s net cash provided by (used in) financing activities?

Answer 1

Cash flow indirect method
Cash flow from operating activities
Net income		5600
Adjustments to reconcile the net income
Depreciation expense	41950
Gain on sale of equipment	-1450
Changes in current asset and liabilities
decrease in accounts receivable	7500
Increase in Inventory	-11300
decrease in accounts payable	-58300
Decrease in income tax payable	-21900
		-43500
Cash flow from operating activities		-37900
Cash flow from Investing activities
Equipment sold	7050
Equipment purchased	-26800
Cash flow from Investing activities		-19750

	Cash flow from Financing activities
	Bonds payable	23500
	Common stock	23500
	Additional paid in capital
	Dividend paid	-14100
	Treasury stock
	Cash flow from Financing activities		32900
	Net Cash and cash equivalent		-24750
Add	Beginning cash and cash equivalent		146550
	Ending cash and cash equivalent		121800