Question

15) Redbird Company uses the indirect method to prepare its statement of cash flows. Using the following information, complete the worksheet for the year ended December 31, 2018.

- Net Income for the year ended December 31, 2018 was $49,000

- Depreciation expense for 2018 was $12,000

- During 2018, plant assets with a book value of $10,000 (cost $10,000 and accumulated depreciation $0) were sold for $14,000

- Plant assets were acquired for $52,000 cash

- Issued common stock for $28,000

- Issued long-term notes payable for $34,000

- Repaid long-term notes payable for $40,000

- Purchased treasury stock for 3,000

- Paid dividends of $10,000

                                                                       Redbird Company

                                                   Spreadsheet for Statement of Cash Flows

                                                            Year Ended December 31, 2018

	Balance 12/31/17	Transaction Analysis Debit	Transaction Analysis Credit	Balance 12/31/18
Panel A—Balance Sheet:
Cash	$18,000			$21,000
Accounts Receivable	35,000			31,000
Merchandise Inventory	25,000			53,000
Plant Assets	70,000			112,000
Accumulated Depreciation—Plant Assets	(20,000)			(32,000)
Total Assets	$128,000			$185,000
Accounts Payable	6,000			4,000
Accrued Liabilities	1,000			2,000
Long-term Notes Payable	50,000			44,000
Common Stock	2,000			30,000
Retained Earnings	74,000			113,000
Treasury Stock	(5,000)			(8,000)
Total Liabilities and Stockholders' Equity	$128,000			$185,000

Answer 1

Answer-

REDBIRD COMPANY
STATEMENT OF CASH FLOWS (USING INDIRECT METHOD)
FOR THE YEAR ENDED DECEMBER 31,2018
Particulars		Amount
		$
Cash flow from operating activities
Net Income		49000
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation		12000
Gain on sale of equipment	($14000-$10000)	-4000
Change in operating assets & liabilities
Decrease in accounts receivable		4000
Increase in inventory		-28000
Decrease in accounts payable		-2000
Increase in accrued liabilities		1000
Net cash flow from operating activities (a)		32000
Cash Flow from Investing activities
New machinery purchased		-52000
Old machinery sold		14000
Net cash Flow from Investing activities (b)		-38000
Cash Flow from Financing activities
Cash dividends paid		-10000
Long-term notes payable issued		34000
Common stock issued		28000
Long-term notes payable paid		-40000
Treasury stock purchased		-3000
Net cash Flow from Financing activities (c)		9000
Net Change in cash c=a+b+c		3000
Beginning cash balance		18000
Closing cash balance		21000