Prepare a statement of cash flows using the below data. Use the indirect method
ID: 2501977 • Letter: P
Question
Prepare a statement of cash flows using the below data. Use the indirect method of reporting cash flows from operating activities. Assume that equipment costing $125,000 was purchased for cash and equipment costing $85,000 with accumulated depreciation of $65,000 was sold for $15,000; that the stock was issued for cash; and that the only entries in the retained earnings account were net income of $51,000 and cash dividends declared of $13,000. Year Year 2008 2007 Cash $100,000 $ 78,000 Accounts receivable (net) 78,000 85,000 Inventories 101,500 90,000 Equipment 410,000 370,000 Accumulated depreciation (150,000) (158,000) $539,500 $465,000 Accounts payable (merchandise creditors) $ 58,500 $ 55,000 Cash dividends payable 5,000 4,000 Common stock, $10 par 200,000 170,000 Paid-in capital in excess of par-- common stock 62,000 60,000 Retained earnings 214,000 176,000 $539,500 $465,000
Explanation / Answer
Statement of Cash Flow Particulars Amount Total Amount Opening cash and cash equivalents 78,000.00 Income 51,000.00 Loss on sale of Equipment(85000-65000-15000) 5,000.00 Depreciation 57,000.00 Decrease in AR 7,000.00 Increase in inventory (11,500.00) Increase in AP 3,500.00 Cash flow from operating activities 112,000.00 Cash flow from Investing activities Sale of Equipment 15,000.00 Purchase of Equipment (125,000.00) Cash flow from Investing activities (110,000.00) Cash flow from Financing activities Issue of Stock 30,000.00 Issue of additional Paid in capital 2,000.00 Dividends Paid (4000 + 13000 - 5000) (12,000.00) Cash flow from Financing activities 20,000.00 Closing cash and cash equivalents 100,000.00