Question

Statement of Cash Flows—Indirect Method

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

		Dec. 31, 20Y3		Dec. 31, 20Y2
Assets
Cash		$256,770		$237,750
Accounts receivable (net)		93,020		85,390
Inventories		262,580		252,830
Investments		0		97,950
Land		134,680		0
Equipment		289,710		223,520
Accumulated depreciation—equipment		(67,830)		(60,280)
	Total assets	$968,930		$837,160
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)		$175,380		$164,920
Accrued expenses payable (operating expenses)		17,440		21,770
Dividends payable		9,690		7,530
Common stock, $10 par		52,320		41,020
Paid-in capital: Excess of issue price over par-common stock		196,690		113,850
Retained earnings		517,410		488,070
	Total liabilities and stockholders’ equity	$968,930		$837,160

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

The investments were sold for $114,600 cash.

Equipment and land were acquired for cash.

There were no disposals of equipment during the year.

The common stock was issued for cash.

There was a $68,690 credit to Retained Earnings for net income.

There was a $39,350 debit to Retained Earnings for cash dividends declared.

Required:

Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

Livers Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y3
Cash flows from operating activities:
	$
Adjustments to reconcile net income to net cash flow from operating activities:
Changes in current operating assets and liabilities:
Net cash flow from operating activities		$
Cash flows from investing activities:
	$
Net cash flow used for investing activities
Cash flows from financing activities:
	$
Net cash flow from financing activities
		$
Cash at the beginning of the year
Cash at the end of the year		$

Answer 1

Livers Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y3
A. Cash Flows from Operating Activity
Net Income		$       68,690.00
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense	$             7,550.00
Profit on sale of Investment	$        (16,650.00)
Changes in current operating assets and liabilities:
Increase in Inventory	$           (9,750.00)
Increase in Accounts Payable	$           10,460.00
Decrease in Accrued Expenses	$           (4,330.00)
Increase in Accounts Receivables	$           (7,630.00)
		$     (20,350.00)
Net cash flow from Operating activities		$       48,340.00
B. Cash flows from Investing Activities
Purchase of Land	$      (134,680.00)
Sale of Investment	$        114,600.00
Purchase of Equipment	$        (66,190.00)
Net Cash Used for Investing activities		$     (86,270.00)
C. Cash Flows from Financing activities
Proceeds from Additional Paid in capital	$           82,840.00
payments of dividends	$        (37,190.00)
Issue of Stock	$           11,300.00
Net Cash flows from Financing activities		$       56,950.00
Net Increase (Decrease) in Cash [A+B+C]		$       19,020.00
Cash at the beginning		$     237,750.00
Cash at the end		$     256,770.00

Working note 1 --Calculation of Cash Dividend paid
Opening Balance of Dividends Payable	$             7,530.00
Add: Dividends Declared during the year	$           39,350.00
Total Dividend Liability	$           46,880.00
Less: Closing Balance of Dividends	$             9,690.00
Dividends Paid in cash During the year	$           37,190.00
Working note 2---Depreciation expense for the year
Closing Balance of Accumulated depreciation on equipment		$ 67,830.00
Less: Opening Balance of Accumulated depreciation on equipment		$ 60,280.00
Depreciation for the Year		$    7,550.00