Was this answer helpful?

1

0

1,360 answers

Statement of Cash Flows (Indirect method)
Particulars	Amount
Cash Flow from operating activities:
Net Income for 2019		$58,850
Adjustments:
Gain on sale of land	($8,000)
Gain on sale of long term investment	($4,000)
Depreciation	$35,500
Amortization expense	$5,000
Increase in accounts receivable	($4,550)
Increase in Dividend receivable	($1,000)
Increase in Inventories	($7,000)
Decrease in Prepaid rent	$9,000
Increase in Prepaid Insurance	($1,200)
Increase in Office Supplies	($250)
Decrease in Accounts payable	($4,000)
Increase in Income tax payable	$1,000
Increase in Wages payable	$2,000
Increase in Dividend payable	$1,500
Decrease in Unearned Income	($1,500)
Decrease in Accrued Liabilities	($5,550)	$16,950
Cash flow from Operating Activities		$75,800
Cash Flow from Investing Activites:
Proceeds from sale of land	$58,000
Proceeds from sale of long term investment	$14,000
Cash paid for purchase of Equipment	($125,000)
Net Cash flow from Investing activities		($53,000)
Cash Flow from Financing Activities:
Cash paid for long term note payable	($10,000)
Stock repurchased	($35,000)
Cash dividend paid	($40,875)
Common stock issued	$98,910
Net cash flow from Financing activities		$13,035
Net change in cash		$35,835
Beginning cash balance		$4,000
Ending cash balance		$39,835
Working Note:
Depreciation on building = 105000-87500 = 17500
Depreciation on equipment = 130000-112000 = 18000
Amortization on Patent = 50000-45000 = 5000
Sale of land = 175000-125000 = 50000+gain on sale of land 8000 = 58000
Sale on investment = 30000-20000 = 10000+4000 gain = 14000
Purchase of Equipment = 525000-400000 = 125000
Dividend paid = Beginning retained earnings+net income-ending retained earnings
= 88747+58850-106722 = 40875
Common Stock issued = 70000+28910 (APIC) = 98910

* There are no non-cash transactions affecting investing activities.

* The only sales of assets are the ones reflected in the income statement.

* Make journal entries, including accounting equation impact, for the following transactions (this will be part of your grade):

1) On April 1, 2019, the company paid $14 per share for Treasury Shares. To remember how this affected financial position,

review this in Chapter 12.

2) On Sept. 1, 2019, the company declared and issued a 5% stock dividend on outstanding shares when the market price of the

stock was $17. To remember how this impacts financial position, review this in Chapter 12.

* All other transactions affecting Contributed Capital and Retained Earnings occurred after Sept. 1, 2019.

* There were no prior period adjustments.