Question

Condensed financial data of Novak Corp. follow.

Novak Corp. Comparative Balance Sheets December 31
Assets		2017			2016
Cash		$ 110,696			$ 66,308
Accounts receivable		120,286			52,060
Inventory		154,125			140,905
Prepaid expenses		38,908			35,620
Long-term investments		189,060			149,330
Plant assets		390,450			332,225
Accumulated depreciation		(68,500	)		(71,240	)
Total		$935,025			$705,208
Liabilities and Stockholders’ Equity
Accounts payable		$ 139,740			$ 92,201
Accrued expenses payable		22,605			28,770
Bonds payable		150,700			200,020
Common stock		301,400			239,750
Retained earnings		320,580			144,467
Total		$935,025			$705,208

Novak Corp. Income Statement Data For the Year Ended December 31, 2017
Sales revenue				$532,190
Less:
Cost of goods sold		$185,580
Operating expenses, excluding depreciation		17,002
Depreciation expense		63,705
Income tax expense		37,374
Interest expense		6,480
Loss on disposal of plant assets		10,275		320,416
Net income				$ 211,774

Additional information:

1.		New plant assets costing $137,000 were purchased for cash during the year.
2.		Old plant assets having an original cost of $78,775 and accumulated depreciation of $66,445 were sold for $2,055 cash.
3.		Bonds payable matured and were paid off at face value for cash.
4.		A cash dividend of $35,661 was declared and paid during the year.

Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1

Solution:

Novak Corp.
Statement of Cash Flows
For the year ended 2017
Particulars	Details	Amount
Cash Flow from Operating Activities:
Net Income	$211,774.00
Adjustments to reconcile net income to net cash provided by operations:
Depreciation Expense	$63,705.00
Loss on disposal of plant assets	$10,275.00
Increase in accounts receivables ($120,286 - $52,060)	-$68,226.00
Increase in inventory ($154,125 - $140,905)	-$13,220.00
Increase in prepaid expenses ($38,908 - $35,620)	-$3,288.00
Increase in accounts payable ($139,740 - $92,201)	$47,539.00
Decrease in accrued expenses payable ($28,770 - $22,605)	-$6,165.00
Net Cash provided (used) by operating activities		$242,394.00
Cash Flow from Investing Activities:
Purchase of plant assets	-$137,000.00
Sale of plant assets	$2,055.00
Purchase of investment ($189,060 - $149,330)	-$39,730.00
Net Cash provided (used) in Investing activities		-$174,675.00
Cash Flow from Financing Activities:
Dividend Paid	-$35,661.00
Repayment of bonds ($200,020 - $150,700)	-$49,320.00
Proceed from issue of common stock ($301,400 - $239,750)	$61,650.00
Net Cash provided (used) in financing activities		-$23,331.00
Net Increase / (Decrease) in Cash		$44,388.00
Cash balance at beginning of year		$66,308.00
Cash balance at end of year		$110,696.00