On the basis of the following data for Branch Co. for the year ended December 31

Question

On the basis of the following data for Branch Co. for the year ended December 31, 2011 and the preceding year, prepare a statement of cash flows using the indirect method of reporting cash flows from operating activities.
Assume that equipment costing $125,000 was purchased for cash and the land was sold for $15,000. The stock was issued for cash and the only entries in the retained earnings account were net income of $56,000 and cash dividends declared and paid of $18,000.

2010 2011
Cash 65,000 54,000
Accounts Receivable(net) 78,000 85,000
Inventories 106,500 90,000
Land - 20,000
Equipment 495,000 370,000
Accumulated depreciation (215,000) (158,000)

Accounts payable(merchandise creditor) 53,500 55,000
Common stock, $10 par 200,000 170,000
Paid in capital in excuse of par- common stock 62,000 60,000
retained earnings 214,000 176,000
Total 529,500 461,000

Explanation / Answer

CASH FLOW FROM INVESTING ACTIVITIES: + sell Long-term assets for cash - buy (construct) Long-term assets for cash = Cash Flow from Investing Activities CASH FLOW FROM FINANCING ACTIVITIES: + Stock issued for cash + Cash borrowed with loans and bonds - Treasury stock repurchased for cash - Cash used to repay loans and bonds - Cash dividends paid =Cash Flow from Financing Activities Total Cash Flow (Operating, Investing, Financing) + Beginning Cash = Ending Cash

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