Prepare a cash flow statement for 2008 with clear documentation (i.e., show your
ID: 2486532 • Letter: P
Question
Prepare a cash flow statement for 2008 with clear documentation (i.e., show your work) for each section of the statement. Use the indirect method.
Additional information
1. There were no write-offs of delinquent accounts during the year.
2. A building was sold during the year for $80.
Company Comparative Balance Sheets and Income Statement For the Years 2007 and 2008 BALANCE SHEETS Assets Cash Accounts receivable Allowance for bad debts Inventory 2008 200 350 (45) 260 600 295 (65) 2007 185 290 (25) 135 500 250 (80) Buildings Accumulated depreciation-buildings Total assets 1,595 1,255 Liabilities&Owners;' Equity Liabilities Accounts payable Wages payable Dividends payable Taxes payable Long-term Bonds payable Discount on bonds payable Total liabilities Owners Equit Common stock Retained earnings Total owners' equity Total liabilities &owners;' equity 400 70 30 50 100 305 67 47 46 100 (10) 642 650 303 953 1,595 500 200 700 1,255 INCOME STATEMENT (2008 Revenue Cost of goods sold Gross margin Operating expenses Wage expense Depreciation expense Bad debt expense Bond interest expense Total operating expenses Net operating income Gain on sale of building Net income before tax Income tax Net income after tax 1,200 450 200 30 20 10 260 190 40 230 69 161Explanation / Answer
Answer:
Statement of cash Flow Cash flow from operating activities: Net income 161 Adjustment: Depreciation expense 30 Gain on sale of Building -40 Increase in accounts receivable -60 Increase in allowance for bad debts 20 Increase in inventory -125 Increase in wages Payable 3 Increase in accounts payable 95 Increase in income tax payable 4 Decrease in discount on bonds payable 2 Net cash provided by operating activities 90 Cash flow from investing activites: Cash received from sale of Building 80 Cash paid for purchase of Building -130 Cash paid for purchase of Land -100 Net cash provided by investing activities -150 Cash flow from financing activities Issue of common stock 150 Dividend paid -75 Net cash provided by financing activiitess 75 Net increase in cash 15 Add: opening cash 185 Closing cash 200