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Question 12 A comparative balance sheet for Rocker Company appears below: ROCKER COMPANY Comparative Balance Sheet...

Question 12

A comparative balance sheet for Rocker Company appears below:

ROCKER COMPANY
Comparative Balance Sheet
Dec. 31, 2020 Dec. 31, 2019
Assets
Cash $34,000 $11,000
Accounts receivable 18,000 13,000
Inventory 25,000 17,000
Prepaid expenses 6,000 9,000
Long-term investments 0 17,000
Equipment 60,000 33,000
Accumulated depreciation—equipment (20,000 ) (15,000 )
    Total assets $123,000 $85,000
Liabilities and Stockholder's Equity
Accounts payable $17,000 $7,000
Bonds payable 36,000 45,000
Common stock 40,000 23,000
Retained earnings 30,000 10,000
    Total liabilities and stockholders' equity $123,000 $85,000
Additional information:
1. Net income for the year ending December 31, 2020 was $35,000.
2. Cash dividends of $15,000 were declared and paid during the year.
3. Long-term investments that had a cost of $17,000 were sold for $14,000.
4. Sales for 2020 were $120,000.


*Prepare a statement of cash flows for the year ended December 31, 2020, using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Solutions

Expert Solution

Answer:-

Rocker Company
STATEMENT OF CASH FLOWS (USING INDIRECT METHOD)
FOR THE YEAR ENDED 2020
Particulars Amount
$  
Cash flow from operating activities
Net Income 35000
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation 5000
Loss on sale of investments 3000
Change in operating assets & liabilities
Increase in accounts receivable -5000
Increase in inventory -8000
Decrease in prepaid expenses 3000
Increase in accounts payable 10000
Net cash flow from operating activities (a) 43000
Cash Flow from Financing activities
Dividends paid -15000
Bonds payable paid -9000
Common stock issued 17000
Net cash Flow from Financing activities (b) -7000
Cash Flow from Investing activities
Sale of long term investments 14000
Purchase of equipment -27000
Net cash Flow from Investing activities (c) -13000
Net Change in cash c=a+b+c 23000
Beginning cash balance 11000
Closing cash balance 34000

ekkarill92 answered 10 months ago
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