Statement of Cash FlowsIndirect Method

The comparative balance sheet of Olson-Jones Industries Inc. for December 31, 20Y2 and 20Y1, is as follows:

Dec. 31, 20Y2 Dec. 31, 20Y1 Assets Cash $202 $66 Accounts receivable (net) 115 83 Inventories 72 45 Land 164 187 Equipment 92 72 Accumulated depreciation-equipment (25) (13) Total Assets $620 $440 Liabilities and Stockholders' Equity Accounts payable (merchandise creditors) $78 $66 Dividends payable 12 - Common stock, $10 par 41 21 Paid-in capital: Excess of issue price over parcommon stock 95 51 Retained earnings 394 302 Total liabilities and stockholders' equity $620 $440

The following additional information is taken from the records:

Land was sold for $58. Equipment was acquired for cash. There were no disposals of equipment during the year. The common stock was issued for cash. There was a $133 credit to Retained Earnings for net income. There was a $41 debit to Retained Earnings for cash dividends declared.

a. Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

Olson-Jones Industries, Inc. Statement of Cash Flows For the Year Ended December 31, 20Y2 Cash flows from operating activities: Net income $ Adjustments to reconcile net income to net cash flow from operating activities: Depreciation Gain on sale of land Changes in current operating assets and liabilities: Increase in accounts receivable Increase in inventories Increase in accounts payable Net cash flow from operating activities $ Cash flows from investing activities: Cash received from sale of land $ Cash paid for purchase of equipment Net cash flow provided by investing activities Cash flows from financing activities: Cash received from sale of common stock $ Cash paid for dividends Net cash flow provided by financing activities Change in cash $ Cash at the beginning of the year Cash at the end of the year $

Feedback

Calculate the increases and decreases in the current asset/liability accounts over the period. What affect do these increases/decreases have on cash? What items might have had an affect on net income but have no cash impact? What items are considered noncurrent assets?

Learning Objective 2, Learning Objective 3, Learning Objective 4, and Learning Objective 5

b. Was Olson-Joness net cash flow from operations more or less than net income? Less

The source(s) of the difference are:

Gain on the sale of land Purchase of equipment Sale of common stock Changes in current operating assets and liabilities Depreciation expense Dividends paid

a, d, and e