Question

 

Portions of the financial statements for Parnell Company are provided below.

PARNELL COMPANY
Income Statement
For the Year Ended December 31, 2021
($ in thousands)
Revenues and gains:
Sales	$	770
Gain on sale of building		12		$	782
Expenses and loss:
Cost of goods sold	$	285
Salaries		117
Insurance		37
Depreciation		120
Interest expense		47
Loss on sale of equipment		12			618
Income before tax					164
Income tax expense					82
Net income				$	82

PARNELL COMPANY
Selected Accounts from Comparative Balance Sheets
December 31, 2021 and 2020
($ in thousands)
	Year
		2021			2020		Change
Cash	$	131		$	103		$	28
Accounts receivable		321			219			102
Inventory		324			422			(98	)
Prepaid insurance		69			85			(16	)
Accounts payable		207			120			87
Salaries payable		108			96			12
Deferred tax liability		66			55			11
Bond discount		184			203			(19	)

Required:
2. Prepare the cash flows from operating activities section of the statement of cash flows for Parnell Company using the indirect method. (Enter your answers in thousands (i.e., 10,000 should be entered as 10). Amounts to be deducted should be indicated with a minus sign.)

Cash Flows from Operating Activities:
Net income
Adjustments for noncash effects:
Gain on sale of building
Loss on sale of equipment
Depreciation expense
Changes in operating assets and liabilities:
Increase in accounts receivable
Decrease in inventory
Increase in accounts payable
Increase in salaries payable
Decrease in prepaid insurance
Increase in deferred tax liability
Net cash flows from operating activities	$0

Answer 1

 

Cashflow statement	Amount $	Amount $
Particulars
Net Income		82.00
Adjustment to reconcile Net Income to Net Cash
Add:
Depreciation Expense		120.00
Loss on sale of equipment		12.00
Less:
Gain on sale of building		12.00
Cash flow from Operations		202.00
Changes in Current Assets/Current Liabilities
Increase in Accounts Receivable	(102.00)
Decrease in Inventory	98.00
Decrease in Prepaid insurance	16.00
Increase in Accounts Payable	87.00
Increase in Salaries Payable	12.00
Increase in Deferred tax liability	11.00	122.00
Net cash provided by operating activities		324.00