Question

Preparation of Statement of Cash Flow Components
JEM Company's comparative balance sheets for 2016 and 2017 appear below

December 31

Assets	2017		2016
Cash	$ 68,000		$ 22,000
Accounts receivable	82,000		66,000
Inventory	170,000		189,000
Land	71,000		110,000
Equipment	280,000		200,000
Accumulated depreciation–equipment	(74,000)		(42,000)
Total	$597,000		$545,000
Liabilities and Stockholders’ Equity
Accounts payable	$ 34,000		$ 47,000
Bonds payable	150,000		200,000
Common stock ($1 par)	170,000		164,000
Retained earnings	243,000		134,000
Total	$597,000		$545,000

Additional information:
1. Net income for 2017 was $155,000; there were no gains or losses.
2. Cash dividends of $46,000 were declared and paid.
3. Depreciation for 2017 is 32,000.

Based on the information provided, answer the following:

a. What was cash provided by operations? (4 points)


b. What was cash provided by investing activity? (3 points)


c. How much was cash provided by financing activity? (3 points)

Answer 1

JEM Company
Statement of Cash Flows (Indirect Method)
For the year ended December 31, 2017
		Amount ($)
Cash flows from Operating Activities
Net Income		155,000
Adjustments to reconcile net income to Net cash provided by operating activities
Add: Depreciation Expenses	32,000
Less: Increase in Accounts Receivables	-16,000
Add: Decrease in Inventory	19,000
Less: Decrease in Accounts Payable	-13,000	22,000
Net cash provided by operating activities		177,000
Cash flows from Investing Activities
Add: Sale of Land	39,000
Less: Purchase of Equipment	-80,000
Net Cash used in Investing Activities		-41,000
Cash flows from Financing Activities
Less: Redemption of Bond Payable	-50,000
Add: Issuance of Common Stock	6,000
Less: Payment of Dividend	-46,000
Net Cash used in financing Activities		-90,000
Net Increase in cash		46,000
Add: Cash balance, at the beginning		22,000
Cash balance, at the end		68,000

(a)-Net cash provided by operations = $177,000

(b)-Net cash provided by investing activity = -$41,000 (Negative)

(c)-Net cash provided by financing activity = -$90,000 (Negative)