The following information is reported by Dakota Company: Net income 20,000 Cash

ID: 2465050 • Letter: T

Question

The following information is reported by Dakota Company:

Net income 20,000

Cash received from the sale of equipment 6,000

Cash paid for treasury stock 6,000

Depreciation expense 3,000

Cash paid for new equipment 10,000

Cash paid for dividends 3,000

Accounts receivable decrease 2,000

Cash received from sale of investments 5,000

Cash paid on long term debt principal amount 5,000

Accounts payable decrease 4,000 Beginning cash balance 20,000 Required:

Prepare a statement of cash flows using the indirect method.

Explanation / Answer

Cash Flow Statment (Indirect method)

A. Cash flow from Operating activities

Net income 20000

Add :- Depreciation 3000

Operating profit before working capital changes 23000

Add :- Decrease in Account receivable 2000

Less:-Decrease in Accounts payable 4000

21000

B. Cash from Investing activities

Cash received from sale of equipment (X) 6000

Cash received from sale of investment (Y) 5000

Cash paid for new equpiment (Z) (-) 10000

(X) + (Y) - (Z) 1000

C. Cash flow from financing activities

Cash paid for treasury stock 6000

Cash paid for dividends 3000

Cash paid on long term debt principal amount 5000

Net Cash from or (used)in financing activities (14000)

Net increase or decrease in Cash and Cash equivalent (A) + (B) + (C)

Add :- Beginning cash balance

8000

20000