Statement of Cash Flows-Indirect Method The following statement of cash flows for Shasta Inc. was not correctly prepared. The cash balance at the beginning of the year was $240,000. All other amounts are correct, except the cash balance at the end of the year. Shasta Inc. Statement of Cash Flows For the Year Ended December 31, 20Y9 Cash flows from operating activities: Net income $360,000 Adjustments to reconcile net income to net cash flow from operating activities: Depreciation 100,800 Gain on sale of investments 17,280 Changes in current operating assets and liabilities: Increase in accounts receivable Increase in inventories Increase in accounts payable Decrease in accrued expenses payable Net cash flow from operating activities 27,360 (36,000) (3,600) (2,400) $463,440 Cash flows from (used for) investing activities: Cash from sale of investments Cash used for purchase of land Cash used for purchase of equipment Net cash flow used for investing activities Cash flows from (used for) financing activities: Cash received from sale of common stock Cash paid for dividends Net cash flow from financing activities Increase in cash Cash at the end of the year $240,000 (259,200) (432,000) (415,200) $312,000 132,000 180,000 $47.760 192.240 Cash at the end of the year Cash at the beginning of the year 192,240 $240,000 a. Answer the following questions. Use your answers to help you in locating errors for the above statement of cash flows. Item 1. Depreciation should be added to net income. 2. Gain on sale of investments should be added to net income. 3. Increases in accounts payable should be deducted from net income. Yes or No Yes No No No 5. Cash paid for property, plant, and equipment should be deducted under investing. Yes 6. Cash received from sale of common stock should be added under financing. Yes 7. Cash paid for dividends should be added under financing. No 4. Increases in accounts receivable should be added to net income. b. Enter the corrected amounts below. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments. Net cash flow from operating activities Net cash flow used for investing activities Net cash flow provided by financing activities Feedback 381,360 451,200 X 180,000 c. Prepare a corrected statement of cash flows. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments. SHASTA INC. Statement of Cash Flows For the Year Ended December 31, 2019 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash flow from operating activities: Depreciation 360,000 100,800 SHASTA INC. Statement of Cash Flows For the Year Ended December 31, 2019 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash flow from operating activities: Depreciation Gain on sale of investments 360,000 100,800 172,890 X Changes in current operating assets and liabilities: Increase in accounts receivable Increase in inventories Increase in accounts payable Decrease in accrued expenses payable Net cash flow from operating activities Cash flows from (used for) investing activities: Cash from sale of investments Cash used for purchase of land Cash used for purchase of equipment Net cash flow from investing activities 27.360 X 36,000 X 3,600 > 2.400 X 240,000 259,200 X 432.000 X 381,360 451,200 X Cash flows from (used for) financing activities: Cash from sale of common stock Cash used for dividends Net cash flow from financing activities 312.000 132.000 X 180.000 Increase in cash Cash at the beginning of the year Cash at the end of the year Eeedback 110,160 192,240 X 302.400 X