Terra Land Company reported $540,000 of net income for 2020. The accountant, in preparing the statement of cash flows, noted several items occurring during 2020 that might affect cash flows from operating activities.

1. Terra declared a $1.50 cash dividend. Ten thousand shares of $1 par common stock were outstanding at the date of record.

2. Terra revised its estimate for warranty expense. Before 2020, Terras warranty expense was 0.5% of its net sales. In 2020, this percentage was increased to 0.7%. Net sales for 2020 were $5,850,000, and the accrued warranty expense increased by

   $89,000 during 2020.

3. Terra sold 500 shares of treasury stock for $43 per share. The shares were originally purchased for $38 per share.

4. Depreciation expense is $156,000.

5. Terra issued 2,000 shares of its $1 par common stock for a building. The market value of the shares on the date of the trans- action was $42 per share.

B Exercises 3

6. Terra holds 30% of Windy Companys common stock as a long-term investment. Windy Company reported $96,000 of net

   income and paid dividends of $35,000 for 2020.

7. Terra purchased 500 shares of Microsoft common at $110 per share and classified the investment as available-for-sale. The market price increased to $115 per share by the end of the year.

Instructions

Prepare a schedule that shows the net cash flow from operating activities using the indirect method. Assume no items other than those listed above affected the computation of 2020 net cash flow from operating activities.