Problem 11-4A Prepare a statement of cash flows - indirect method (LO11-2, 11-3)
ID: 2572220 • Letter: P
Question
Problem 11-4A Prepare a statement of cash flows - indirect method (LO11-2, 11-3)
The income statement, balance sheets, and additional information for Video Phones, Inc., are provided.
Additional Information for 2018:
1. Purchase investment in bonds for $108,000.
2. Sell land costing $33,000 for only $24,700, resulting in a $8,300 loss on sale of land.
3. Purchase $63,000 in equipment by borrowing $63,000 with a note payable due in three years. No cash is exchanged in the transaction.
4. Declare and pay a cash dividend of $26,500.
Required:
Prepare the statement of cash flows using the indirect method. Disclose any noncash transactions in an accompanying note. (List cash outflows and any decrease in cash as negative
Income Statement
For the Year Ended December 31, 2018 Net sales $ 3,236,000 Expenses: Cost of goods sold $ 2,100,000 Operating expenses 888,000 Depreciation expense 30,000 Loss on sale of land 8,300 Interest expense 16,500 Income tax expense 51,000 Total expenses 3,093,800 Net income $ 142,200 Net income $142,200 Adjustments to reconcile net income to net cash flows from operating activities 30,000 8,300 Depreciation expense Loss (on sale of land) Increase in accounts receivable Decrease in inventory Increase in prepaid rent Decrease in accounts payable Decrease in interest payable Increase in income tax payable 33,000 (6,360) (15,300) Net cash flows from operating activities $191,840 Cash Flows from Investing Activities Purchase investment in bonds (108,000) Sale of land Net cash flows from investing activities (108,000) Cash Flows from Financing Activities Payment of cash dividends Net cash flows from financing activities Cash at the beginning of the period Cash at the end of the period Note: Noncash Activities 0 Purchase equipment issuing a note payable $ 63,000
Explanation / Answer
Statement of cash flow :
Cash flow from operating activities Net income 142200 Adjustment to reconcile net income Depreciation expenses 30000 Loss on sale of land 8300 Increase account receivable (21300) Decrease inventory 33000 Increase prepaid rent (6360) Decrease account payable (15300) Decrease interest payable (4300) Increase income tax payable 1000 Net cash flow from operating activities 167240 Cash flow from investing activities Purchase of investment (108000) sale land 24700 Net Cash flow from investing activities (83300) Cash flow from financing activities Dividend paid (26500) Net Cash flow from financing activities (26500) Net cash flow 57440 Beginning cash 169140 Ending cash 226580 Note : Non cash activities Purchase equipment issuing a notes payable $63000