4B Ozark Corporation reported net income of $100,000 for 2015. The income statem

Question

4B Ozark Corporation reported net income of $100,000 for 2015. The income statement revealed sales of $1,000,000; gross profit of $520,000, selling and administrative costs of $340,000; interest expense of $20,000; and income taxes of $60,000 The selling and administrative expenses included $25,000 for depreciation. No equipment was sold during the year. Equipment purchases were made with cash. Prepaid insurance included in the balance sheet related to administrative costs. All accounts payable included in the balance sheet relate to inventory purchases. The change in retained earnings is attributable to net income and dividends. The increase in common stock and additional paid-in capital is due to issuing additional shares for cash. Using the indirect approach, prepare a statement of cash flows for Ozark for the year ending December 31, 2015. Comparative balance sheets for Ozark follow OZARK CORPORATION Balance Sheet December 31, 2014 and 2015 10ASSETS 2015 Cash Accounts receivable Inventories 458,700 S 199.250 248.600 2,014 471,450 171.500 278,800 12

Explanation / Answer

Cash flow statement for the year ended December 31, 2015

Particulars Amount ($) Amount ($) Cash flow from operating activities Net income after taxes 100000 Add : taxes 60000 Add : Interest expense 20000 Add : Non cash expenditure - Depreciation 25000
Income from operating activity before taxes 205000 Less : Income taxes -60000 Income from operating activity after taxes 145000 Change in current assets and liabilities Change in account receivable -27750 Change in inventory 30200 Change in Prepaid insurance -2000 Change in Accounts payable -7700 Change in income tax payable 14000 Net cash flow from operating activity 151750 Cash flow from investing activity Purchase of equipment -200000 Net cash flow from financing activity -200000 Cash flow from financing activity Interest expense [15000(opening) + 20000 - 10500(closing)] -24500 Dividends paid [586350 + 100000(income) - 646350] -40000 Increase in common stock (issue of shares) 10000 Increase in paid in capital in excess of par (issue of shares) 90000 Net cash flow from financing activities 35500 Total cash flow generated during the year -12750 Cash in the beginning 471450 Cash as on December 31, 2015 458700

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