Question

The Fisheries Processing Corporation prepared the following income statement and comparative balance sheet for 2021:

 

FISHERIES PROCESSING CORPORATION
	Income Statement
	Year Ended December 31, 2021
Sales ......................................................................................................................................						$ 1,800,000
Cost of goods sold ................................................................................................................									880,000
Gross profit ...........................................................................................................................						920,000
Depreciation expense ..........................................................................................................						227,000
Other operating expenses ....................................................................................................						197,000
Interest expense ...................................................................................................................						165,000
Loss on sale of land ..............................................................................................................						120,000
Income before taxes .............................................................................................................						211,000
Income taxes ........................................................................................................................						70,800
Profit .....................................................................................................................................						$ 140,200

FISHERIES PROCESSING CORPORATION
	Comparative Balance Sheet
	December 31					2021				2020
		Assets
Cash						$ 385,200				$ 200,000
Accounts receivable						640,000				670,000
Merchandise inventory						2,336,000				2,090,000
Property, plant, and equipment						880,000				800,000
Less: Accumulated depreciation						(787,000)				(560,000)
Goodwill						219,000							219,000
Total Assets						$ 3,673,200				$ 3,419,000
	Liabilities and Shareholders' Equity
Accounts payable						$ 389,000				$ 265,000
Other accrued payables						160,000				240,000
Dividends payable						80,000				80,000
Income taxes payable						27,000				42,000
Note payable (long-term)						180,000				560,000
Bonds payable						900,000				400,000
Common shares						1,600,000				1,600,000
Retained earnings						337,200							232,000
Total Liabilities & Shareholders' Equity						$ 3,673,200				$ 3,419,000

 

Additional data:

1.       Equipment was purchased for $ 400,000.

 

2.       Land was sold for cash proceeds of $ 200,000.

 

3.       The company sold bonds of $ 500,000 and made $ 380,000 of principal payments on notes payable.

 

Instructions

 

Prepare a cash flow statement for 2021, using the indirect method.

Answer 1

cash flow statement

particulars		amount
cash flow from operating activities:
net profit after tax		140200
adjustment to convert net income to a cash basis
depreciation expenses	227000
loss on sale of land	120000
decrease in accounts receivable	30000
increase in inventory	-246000
increase in accounts payable	124000
decrease in accrued payables	-80000
decrease in income taxes payable	-15000	160000
net cash provided by operating activities		300200
cash flow from investing activities:
sale of land	200000
purchase of equipment	-400000
net cash provided by investing activities		-200000
cash flow from financing activities:
notes paid	-380000
dividend paid	-35000
issue of bond	500000
net cash provided by financing activities		85000
cash balance at the beginning of the year		200000
cash balance at the end of the year		385200

notes:-

1) depreciation, loss on sale are noncash items and hence added back to net profit.

2)dividend paid during the year is calculated as follows:-

retained earnings closing balance= retained earnings opening balance+net income-dividend paid

337200=232000+140200-dividend paid,hence dividend paid=372200-337200=$35000