The following additional information was taken from the records: The investments

Question

The following additional information was taken from the records: The investments were sold for $140,000 cash. Equipment and land were acquired for cash. There were no disposals of equipment during the year. The common stock was issued for cash. There was a $75,520 credit to Retained Earnings for net income. There was a $48.000 debit to Retained Earnings for cash dividends declared. Instructions Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.

Explanation / Answer

Prob. 16–1A

MAVENIR TECHNOLOGIES INC.

Statement of Cash Flows
For the Year Ended December 31, 2010

Cash flows from operating activities:
Net income .................................................... $ 75,520
Adjustments to reconcile net income to net
cash flow from operating activities:
Depreciation.............................................             9,200
Gain on sale of investments...................                    (20,000)
Changes in current operating assets and
liabilities:
Increase in accounts receivable .......                             (9,440)
Increase in inventories ......................                       (12,320)
Increase in accounts payable ...........                             11,760
Decrease in accrued expenses
payable .............................................                  (5,200)
Net cash flow from operating activities ......                                 $ 49,520

Cash flows from investing activities:
Cash received from sale of investments ....                    $140,000
Less: Cash paid for purchase of land......... $164,000
Cash paid for purchase of
equipment......................................        76,000      240,000
Net cash flow used for investing
activities......................................................                      (100,000)

Cash flows from financing activities:
Cash received from sale of
common stock............................................         $116,000
Less cash paid for dividends.......................               45,600*
Net cash flow provided by financing
activities......................................................                          70,400
Increase in cash .................................................                     19,920
Cash at the beginning of the year.....................                             292,960
Cash at the end of the year ...............................                      $ 312,880
*$48,000 + $9,600 – $12,000 = $45,600

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