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

1	Cash flows from (used for) operating activities:
2	Net income		$360,000.00
3	Adjustments to reconcile net income to net cash flows from (used for) operating activities:
4	Depreciation		100,800.00
5	Gain on sale of investments		17,280.00
6	Changes in current operating assets and liabilities:
7	Increase in accounts receivable		27,360.00
8	Increase in inventories		(36,000.00)
9	Increase in accounts payable		(3,600.00)
10	Decrease in accrued expenses payable		(2,400.00)
11	Net cash flows from operating activities			$463,440.00
12	Cash flows from (used for) investing activities:
13	Cash received from sale of investments		$240,000.00
14	Cash paid for purchase of land		(259,200.00)
15	Cash paid for purchase of equipment		(432,000.00)
16	Net cash flows used for investing activities			(415,200.00)
17	Cash flows from (used for) financing activities:
18	Cash received from issuing common stock		$312,000.00
19	Cash dividends		(132,000.00)
20	Net cash flows from financing activities			180,000.00
21	Net increase in cash			$47,760.00
22	Cash balance, December 31, 20Y9			192,240.00
23	Cash balance, January 1, 20Y9			$240,000.00

Required:

a.	Answer the questions in the Questions panel. Use your answers to help you in locating errors for the above statement of cash flows.
b.	Enter the corrected amounts in the Questions panel. Use the minus sign to indicate cash outflows, cash payments, and decreases in cash.
c.	Prepare a corrected statement of cash flows, using the indirect method. Be sure to complete the heading of the statement. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Use the minus sign to indicate cash outflows, decreases in cash and a net cash outflow for each section, if required.

Labels
December 31, 20Y9
For the Year Ended December 31, 20Y9
Amount Descriptions
Cash received from sale of investments
Cash paid for purchase of land
Cash paid for purchase of equipment
Cash received from issuing common stock
Cash dividends
Decrease in accounts payable
Decrease in accounts receivable
Decrease in accrued expenses payable
Decrease in cash
Decrease in inventories
Depreciation
Gain on sale of investments
Increase in accounts payable
Increase in accounts receivable
Increase in cash
Increase in inventories
Net cash flows from operating activities
Net cash flows used for operating activities
Net cash flows from investing activities
Net cash flows used for investing activities
Net cash flows from financing activities
Net cash flows used for financing activities
Net income
Net loss

a. Answer the following questions. Use your answers to help you in locating errors for the statement of cash flows presented in the Instructions.

	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 from sale of common stock should be added under financing.
7.	Cash used for dividends should be added under financing.

b. Choose the correct amount description and enter the corrected amounts below. Use the minus sign to indicate cash outflows, cash payments, and decreases in cash.

c. Prepare a corrected statement of cash flows, using the indirect method. Be sure to complete the heading of the statement. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Use the minus sign to indicate cash outflows, decreases in cash and a net cash outflow for each section, if required.

Shasta Inc.

Statement of Cash Flows

1	Cash flows from (used for) operating activities:
2
3	Adjustments to reconcile net income to net cash flows from (used for) operating activities:
4
5
6	Changes in current operating assets and liabilities:
7
8
9
10
11
12	Cash flows from (used for) investing activities:
13
14
15
16
17	Cash flows from (used for) financing activities:
18
19
20
21
22	Cash balance, January 1, 20Y9
23	Cash balance, December 31, 20Y9