Statement of Cash FlowsIndirect 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 FlowsFor 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 27,360 Increase in inventories (36,000) Increase in accounts payable (3,600) Decrease in accrued expenses payable (2,400) Net cash flow from operating activities $463,440 Cash flows from (used for) investing activities: Cash from sale of investments $240,000 Cash used for purchase of land (259,200) Cash used for purchase of equipment (432,000) Net cash flow used for investing activities (415,200) Cash flows from (used for) financing activities: Cash received from sale of common stock $312,000 Cash paid for dividends 132,000 Net cash flow from financing activities 180,000 Increase in cash $47,760 Cash at the end of the year 192,240 Cash at the beginning of the year $240,000 a. Answer the following questions. Use your answers to help you in locating errors for the above statement of cash flows. Item Yes or No 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. 4. Increases in accounts receivable should be added to net income. 5. Cash paid for property, plant, and equipment should be deducted under investing. 6. Cash received from sale of common stock should bereceivable should be added to net income. 5. Cash paid for property, plant, and equipment should be deducted under investing. 6. Cash received from sale of common stock should be added under financing. 7. Cash paid for dividends should be added under financing. 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 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, 20vg Cash flows from operating activities: Adjustments to reconcile net income to net cash flow from operating activities: Changes in current operating assets and liabilities: Net cash flow from operating activities - Cash flows from (used for) investing activities: Net cash flow from investing activities - Cash flows from (used for) financing activities: Net cash flow from financing activities Cash at the beginning of the year Cash at the end of the year
