The differences in Bravo Inc.\'s balance sheet accounts at December 31, year 2 a
ID: 2479608 • Letter: T
Question
The differences in Bravo Inc.'s balance sheet accounts at December 31, year 2 and year 1, are presented below
Assets Increase (Decrease)
Cash and cash equivalents $120,000
Available-for-sale securities 300,000
Accounts receivable, net 0
Inventory 80,000
Long-term investments (100,000)
Plant assets 700,000
Accumulated depreciation 0
Total $1,100,000
Liabilities and Stockholders' Equity Increase (Decrease
Accounts payable and accrued liabilities $(5,000)
Dividends payable 160,000
Short-term bank debt 325,000
Long-term debt 110,000
Common stock, $10 par 100,000
Additional paid-in capital 120,000
Retained earnings 290,000
Total $1,100,000
he following additional information relates to year 2:
Net income was $790,000.
> Cash dividends of $500,000 were declared.
> Building costing $600,000 and having a carrying amount of $350,000 was sold for $350,000.
> Equipment costing $110,000 was acquired through issuance of long-term debt.
> A long-term investment was sold for $135,000. There were no other transactions affecting long-term investments.
> 10,000 shares of common stock were issued for $22 a share. Prepare Bravo's year 2 Cash Flows from Operating Activities (section), using
the INDIRECT METHOD
Explanation / Answer
Bravo Inc.'s Statement of Cash Flows (Indirect Method) For the Year ended Dec. 31, Year 2 Cash Flow from opearating activities: Net Income 790,000 Gain on sale of Building (35,000) Depreciation Expense 250,000 Add/(Less) non cash effects on operating activities Increase in Inventory (80,000) Decrease in Accounts Payables and accrued liabilities (5,000) 130,000 Net Cash provided by operating activities 920,000 Cash flow from Investing Activities Incerase in Available-for-sale securities (300,000) Purchase of Equipment / Plant assets (1,190,000) Sale of Building 350,000 Sale of Long Term Investments 135,000 Cash Flow / (used) from Investing activities (1,005,000) Cash Flow from Financing Activities Increase in Short term bank Debt 325,000 Issue of Common Stock 220,000 Cash dividend paid (340,000) Cash Flow from Financing Activities 205,000 Net Increase / (Decrease) in Cash 120,000 Noncash investing/financing activities: Issuance of Long Term debt for Equipment 110,000 Plant account Particulars Amt Particulars Amt To Long term Debt 110,000 Cash - Sale of Building 350,000 To Cash (Bal. Fig.) 1,190,000 Accumulated dep - Building 250,000 Incerase in Plant assets 700,000 1,050,000 1,300,000