Question

The comparative balance sheet of Livers Inc. for December 31, 20Y3 and 20Y2, is shown as follows:

1		Dec. 31, 20Y3	Dec. 31, 20Y2
2	Assets
3	Cash	$625,650.00	$586,340.00
4	Accounts receivable (net)	228,170.00	208,030.00
5	Inventories	641,480.00	617,130.00
6	Investments	0.00	240,290.00
7	Land	328,170.00	0.00
8	Equipment	706,070.00	552,300.00
9	Accumulated depreciation-equipment	(165,580.00)	(147,010.00)
10	Total assets	$2,363,960.00	$2,057,080.00
11	Liabilities and Stockholders’ Equity
12	Accounts payable (merchandise creditors)	$424,300.00	$404,860.00
13	Accrued expenses payable (operating expenses)	41,850.00	52,880.00
14	Dividends payable	23,200.00	19,880.00
15	Common stock, $4 par	153,000.00	99,000.00
16	Paid-in capital: Excess of issue price over par—common stock	418,000.00	279,800.00
17	Retained earnings	1,303,610.00	1,200,660.00
18	Total liabilities and stockholders’ equity	$2,363,960.00	$2,057,080.00

Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows:

A.	The investments were sold for $280,680 cash.
B.	Equipment and land were acquired for cash.
C.	There were no disposals of equipment during the year.
D.	The common stock was issued for cash.
E.	There was a $199,210 credit to Retained Earnings for net income.
F.	There was a $96,260 debit to Retained Earnings for cash dividends declared.

Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

Score: 153/173

Livers Inc.

Statement of Cash Flows

?

1	Cash flows from operating activities:
2	?	?
3	Adjustments to reconcile net income to net cash flow from operating activities:
4	?	?
5	?	?
6	Changes in current operating assets and liabilities:
7	?	?
8	?	?
9	?	?
10	?	?
11	?
12
13	Cash flows from investing activities:
14	?	?
15	?	?
16	?	?
17	?		?
18
19	Cash flows from financing activities:
20	?
21	?	?
22	?
23	?
24	Cash at the beginning of the year		?
25	Cash at the end of the year

Answer 1

Solution

Livers Inc

Statement of cash flows:

	Livers Inc
Statement of Cash Flows (Indirect Method)
for the year ended December 31, 20Y3
Cash flows from operating activities:
Net Income		$199,210
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense	$18,570
gain on sale of investments	($40,390)
Changes in current operating assets and liabilities:
Increase in accounts receivable	($20,140)
Increase in inventory	($24,350)
increase in accounts payable	$19,440
decrease in accrued expenses payable	($11,030)
increase in dividends payable	$3,320	-54,580
Cash flow from operating activities		$144,630
Cash flow from investing activities:
Proceeds from sale of investment	$280,680
Purchase of land	($328,170)
Purchase of equipment	($153,770)
Cash flow from investing activities		($201,260)
Cash flow from financing activities:
Issue of common stock	$192,200
Dividends paid	($96,260)
Cash flow from financing activities		$95,940
Excess of cash		$39,310
Beginning balance		$586,340
Ending cash balance		$625,650

Note:

Cash from issue of common stock –

Increase in common stock par value = $54,000

Add: increase in paid-in capital$138,200

Cash from issue of common stock$192,200

Gain on sale of investments:

Sale proceeds$280,680

Less: Book value $240,290

Gain on sale $40,390