1. 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 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			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 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	$fill in the blank e2fece044f9cfcd_8
   Net cash flow used for investing activities	$fill in the blank e2fece044f9cfcd_9
   Net cash flow provided by financing activities	$fill in the blank e2fece044f9cfcd_10

   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, 20Y9
   Cash flows from operating activities:
   	$fill in the blank 31c7acf91fa002e_2
   Adjustments to reconcile net income to net cash flow from operating activities:
   	fill in the blank 31c7acf91fa002e_4
   	fill in the blank 31c7acf91fa002e_6
   Changes in current operating assets and liabilities:
   	fill in the blank 31c7acf91fa002e_8
   	fill in the blank 31c7acf91fa002e_10
   	fill in the blank 31c7acf91fa002e_12
   	fill in the blank 31c7acf91fa002e_14
   Net cash flow from operating activities		$fill in the blank 31c7acf91fa002e_15
   Cash flows from (used for) investing activities:
   	$fill in the blank 31c7acf91fa002e_17
   	fill in the blank 31c7acf91fa002e_19
   	fill in the blank 31c7acf91fa002e_21
   Net cash flow from investing activities		fill in the blank 31c7acf91fa002e_22
   Cash flows from (used for) financing activities:
   	$fill in the blank 31c7acf91fa002e_24
   	fill in the blank 31c7acf91fa002e_26
   Net cash flow from financing activities		fill in the blank 31c7acf91fa002e_27
   		$fill in the blank 31c7acf91fa002e_29
   Cash at the beginning of the year		fill in the blank 31c7acf91fa002e_30
   Cash at the end of the year		$fill in the blank 31c7acf91fa002e_31

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