Example:
The income statement and additional data of Newton Travel Products, Inc., follow: (lick the icon to view the income statement. O (Click the icon to view the additional data. Requirements 1. Prepare Newton's statement of cash flows for the year ended December 31, 2018, using the indirect method. 2. Evaluate the company's cash flows for the year. In your evaluation, mention all three categories of cash flows and give the rationale for your evaluation. Requirement 1. Prepare Newton's statement of cash flows for the year ended December 31, 2018, using the indirect method Start by completing the cash flows from operating activities. Then complete each section of the statement of cash flows, including the noncash investing and financing activities. (Use parentheses or a minus sign for numbers to be subtracted and for a net decrease in cash.) Newton Travel Products, Inc. Statement of Cash Flows (Indirect Method) Year Ended December 31, 2018 1 Data Table a. Acquisition of plant assets was $158,000. Of this amount, $105,000 was paid in cash and $53,000 was financed by signing a note payable b. Proceeds from the sale of land totaled $45,000 c. Proceeds from the issuance of common stock totaled $47,000 d. Payment of a long-term note payable was $11,000 e. Payment of dividends was $10,000 f. From the balance sheets: Newton Travel Products, Inc Income Statement Year Ended December 31, 2018 Revenues $ 255,000 Service revenue December 31, 8,600 s 263,600 Dividend revenue 2018 2017 Expenses Current assets Cost of goods sold Salary expense Depreciation expense Advertising expense Interest expense Income tax expense 95,000 59,000 21,000 4,600 3,300 $165,000 $ 134,100 53,000 49,000 8,200 Cash Accounts receivable Inventory Prepaid expenses 42,000 33,000 10,000 6,000 188,900 Current liabilities: Accounts payable Accrued liabilities $ 74,700 $30,000 $ 18,000 Net income 79,000 11,000 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation Decrease in accounts receivable Decrease in inventory Increase in prepaid expenses Increase in accounts payable Decrease in accrued liabilities Net cash provided by (used for) operating activities Cash flows from investing activities: Acquisition of plant assets Proceeds from sale of land Net cash provided by (used for) investing activities Cash flows from financing activities: Proceeds from issuance of common stock Payment of long-term note payable Payment of dividends Net cash provided by (used for) financing activities Net increase (decrease) in cash Cash balance, December 31,2017 Cash balance, December 31, 2018 Noncash investing and financing activities: Acquisition of plant assets by issuing a note payable
