Question

Problem B, Cash Flow CWH (unrelated to Problem A) provides you with comparative statements of financial position and some additional information. Using the indirect method, calculate cash flow from operating activities. Then as best you can, calculate cash inflow/outflow from Investing activities and from Financing activities (you’ll need to make assumptions, you do not have complete information and it isn’t available).

12/31/19 12/31/2020

Cash .................................................................. $ 5,000 $ 17,000

Accounts receivable .......................................... 35,000 45,000

Inventory........................................................... 75,000 63,000

Total current assets ........................................... 115,000 125,000

Land .................................................................. 100,000 100,000

Buildings........................................................... 5,000,000 5,000,000

Equipment......................................................... 12,000,000 21,000,000

Accumulated Depreciation................................ (4,000,000) (4,750,000)

Net PP&E.......................................................... 13,100,000 21,350,000

Patents............................................................... 7,000,000 5,800,000

Total Assets....................................................... $20,215,000 $27,275,000

Accounts payable .............................................. $ 21,000 $ 45,000

Accrued expenses.............................................. 25,000 60,000

Income taxes payable........................................ 12,000 35,000

Total current liabilities...................................... 58,000 140,000

Long term debt.................................................. 12,000,000 16,000,000

Common stock .................................................. 1,500,000 2,000,000

Retained earnings.............................................. 6,657,000 9,135,000

Total Liabilities and Equity .............................. $20,215,000 $27,275,000

[NOTE: I have posted an Excel spreadsheet with the above information for your use, if you wish. If you do that, please just cut and paste a copy into your word submission. Make sure it’s readable, probably need to format the page as landscape format, not portrait.]

Additional information provided:

• Net income = $2,600,000

• Dividends were declared and paid during the year.

• Depreciation expense = $750,000

• Make reasonable assumptions as need be.

Required:

1. Calculate cash flow from operating activities, showing your complete calculation. The number alone is not sufficient.

2. Calculate cash provided by/used in investing activities (you’ll need to make some assumptions).

3. Calculate cash provided by /used in financing activities (again, you’ll need to make some assumptions)

4. Show that the sum of the three cash flow numbers is equal to the change in cash.

Answer 1

The answer has been presented in the supporting sheet.

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