The following information was obtained from the accounting records and financial statements of Kenai Inc. Assets...

The following information was obtained from the accounting records and financial statements of Kenai Inc.

Assets	2019	2020	∆
Cash	$ 750,000	$ 685,000	(65,000)
Accounts receivable	345,000	498,000	153,000
Inventory	250,000	378,000	128,000
Capital assets	1,456,000	2,354,000	898,000
Accumulated depreciation	(128,000)	(196,000)	(68,000)
Net capital assets	1,328,000	2,158,000	830,000
Total	2,673,000	3,719,000

Liabilities and Stockholders’ equity
Accounts payable	463,000	168,000	(295,000)
Salaries payable	367,000	456,000	89,000
Long-term debt	100,000	192,000	92,000
Common stocks	750,000	1,500,000	750,000
Retained earnings	993,000	1,403,000	410,000
Total	2,673,000	3,719,000

Additional information:

Kenai declared and paid cash dividends of $75,000.
Kenai issued a stock dividend valued at $50,000.
Kenai sold equipment that cost $120,000, with book value of $85,000 for $145,000 in cash.
Kenai issued common stocks for plant and equipment. The common stocks had a current market value of $250,000.
Kenai issued a bond with a face value of $100,000 at $90,000, interest payments are $6,000 per year and interest expenses are $8,000 per year.

Required:

Prepare the cash flow statement, using the indirect method, for Kenai for the year ended December 31, 2020.

Expert Solution

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Workings- Indirect Method
Net Income	Amount $
Closing Balance- Retained Earnings	1,403,000.00
Add: Cash Dividends	75,000.00
Add: Stock Dividends	50,000.00
Less: Opening Balance- Retained Earnings	(993,000.00)
Net Income	535,000.00

Depreciation Expense
Accumulated depreciation- Closing balance	196,000.00
Add: Depreciation on equipment sold (120,000-85,000)	35,000.00
Less: Accumulated depreciation- Opening balance	(128,000.00)
Depreciation Expense	103,000.00

Gain on sale of equipment
Sale value of equipment	145,000.00
Less: Book value of equipment sold	85,000.00
Gain on sale of equipment	60,000.00
Capital Assets purchased
Closing Balance	2,354,000.00
Add: Cost of equipment sold	120,000.00
Less: Opening Balance	(1,456,000.00)
Capital Assets purchased	1,018,000.00
Less: Common Stock issued	250,000.00
Capital Assets purchased in cash	768,000.00

Common Stock Issued
Closing Balance	1,500,000.00
Less: Opening Balance	750,000.00
Less: Issued against purchase of capital assets	250,000.00
Less: Stock dividend	50,000.00
Common Stock Issued	450,000.00

Kenai Inc.
Cashflow statement	Amount $	Amount $
Particulars
Net Income		535,000.00
Adjustment to reconcile Net Income to Net Cash
Add:
Depreciation Expense		103,000.00
Adjustment of interest expense (8,000-6,000)		2,000.00
Less:
Gain on sale of equipment		60,000.00
Cash flow from Operations		580,000.00
Changes in Current Assets/Current Liabilities
Increase in Accounts Receivable	(153,000.00)
Increase in Inventory	(128,000.00)
Decrease in Accounts Payable	(295,000.00)
Increase in Salaries payable	89,000.00	(487,000.00)
Net cash provided by operating activities		93,000.00

Cash flow from investing activities
Capital Assets purchased in cash	(768,000.00)
Equipment sold	145,000.00
Net cash use for investing activities		(623,000.00)

Cash flow from financing activities
Common Stock Issued	450,000.00
Bonds Payable Issued	90,000.00
Dividends paid	(75,000.00)
Net cash used for financing activities		465,000.00

Net Increase/(Decrease) in cash		(65,000.00)
Cash Balance, beginning		750,000.00
Cash Balance, ending		685,000.00

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