On the basis of the following data for Breach Co. for the current and preceding

Question

On the basis of the following data for Breach Co. for the current and preceding years ended December 31, prepare a statement of cash flows using the indirect method. Assume that equipment costing $25,000 was purchased for cash and no long-term assets were sold during the period Stock was issued for cash-3,200 shares at par Net income for the current year was $76,000. Cash dividends declared and paid were $13,000 Current Year Prior Year Assets Cash Accounts Receivable (net) Inventories Equipment Accumulated Depreciation Total assets $170,000 78,000 106,500 395,000 $74,000 85,000 90,000 370,000 (195,000)(158,000) $461,000 $ 554,500 Liabilities and stockholders' equity Accounts Payable (merchandise creditors) Taxes Payable Common Stock, $10 par Retained Earnings Total Liabilities and Stockholders' Equity $51,000 2,500 262,000 239,000 $ 554,500 $50,000 5,000 230,000 176,000 $461,000

Explanation / Answer

Solution:

Breach Co Statement of Cash Flows For year ended December 31 Particulars Details Amount Cash Flow from Operating Activities: Net Income $76,000.00 Adjustments to reconcile net income to net cash provided by operations: Depreciation Expense ($195,000 - $158,000) $37,000.00 Decrease in accounts receivables ($85,000 - $78,000) $7,000.00 Increase in inventory ($106,500 - $90,000) -$16,500.00 Increase in accounts payable ($51,000 - $50,000) $1,000.00 Decreae in taxes payable ($5,000 - $2,500) -$2,500.00 Net Cash provided by operating activities $102,000.00 Cash Flow from Investing Activities: Purchase of Equipment -$25,000.00 Net Cash Provided by Investing activities -$25,000.00 Cash Flow from Financing Activities: Proceed from issue of common stock $32,000.00 Dividend Paid -$13,000.00 Net Cash Provided by financing activities $19,000.00 Net Increase / (Decrease) in Cash $96,000.00 Cash balance at beginning of year $74,000.00 Cash balance at end of year $170,000.00

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