Operating Cash Flows (Appendix) The following information was taken from Lambers
ID: 2415503 • Letter: O
Question
Operating Cash Flows (Appendix)
The following information was taken from Lamberson Company’s accounting records:
Additional information for the year:
Dividends declared and paid totaled $700.
On January 1, 2013, convertible preferred stock that had originally been issued at par value were converted into 500 shares of common stock. The book value method was used to account for the conversion.
Long-term nonmarketable investments that cost $1,600 were sold for $2,300.
The long-term note payable was paid by issuing 250 shares of common stock at the beginning of the year.
Equipment with a cost of $2,000 and a book value of $300 was sold for $100. The company uses one Accumulated Depreciation account for all depreciable assets.
Equipment was purchased at a cost of $16,200.
The 12% bonds payable were issued on August 31, 2013, at 97. They mature on August 31, 2023. The company uses the straight-line method to amortize the discount.
Taxable income was less than pretax accounting income, resulting in a $396 increase in deferred taxes payable.
Explanation / Answer
Cash flows statement of the year ended 31st december,2013 is as follows
Cash flows from operating activities
Particulars Amount ($)
Net income $ 4800
Add: depreciation expence 2100
bond interest expence 410
loss on sale of equipment 200
income tax expence 2050 4760
Less: gain of sale of investment (700)
dividend revenue (820) (1520) 3240
operating cash flow before working capital changes 8040
working capital changes
decrease in accounts recievable 110
increase in marketable securities (1300)
decrease in inventories 190
increase in prepaid items (410)
increase in accounts payable 350
decrease in wages payable (450)
increase in interest payable 400 (1110)
Net income after working capital changes 6930
income tax
Cash flow from investing activities
sale of investments 2300
sale of equipment 100
purchase of equipment (16200)
dividend revenue 840
Net income from investing activities (12960)
Cash flows from financing activities
dividend declared and paid (700)
issue of bonds payable 10000
issue of common stock 7500
additional capital 5000
Net income from financing activities 21800
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