eBook Problem-Solving Strategy Statement of Cash Flows-Indirect Method The compa

ID: 2473471 • Letter: E

Question

eBook Problem-Solving Strategy Statement of Cash Flows-Indirect Method The comparative balance sheet of Amelia Enterprises, Inc. at December 31, 2014 and 2013, is as follows: Dec. 31, 2014 Dec. 31, 2013 Assets Cash Accounts receivable (net) Merchandise ventory Prepaid expenses Equipment Accumulated depreciation-equipment $58,980 90,630 129,480 $72,200 97,340 120,640 3,660 216,160 (53,010) $456,990 263,740 (68,570) $479,530 Total Liabilities and Stockholders' Equity Accounts payable (merchandise creditors Mortgage note payable Common stock, $1 par Paid-in capital in excess of par-common stock Retained earnings $100,700 95,510 137,100 10,000 16,000 231,000 131,830 $479,530 85,380 Total $456,990 Additional data obtained from the income statement and from an examination of the accounts in the ledger for 2014 are as and from an examination of the accounts in the ledger for 2014 are as follows a. Net income, $118,910 b. Depreciation reported on the income statement, $33,500. c. Equipment was purchased at a cost of $65,520, and fully depreciated equipment costing $17,940 was discarded, with no salvage realized. d. The mortgage note payable was not due until 2016, but the terms permitted earlier payment without penalty. e. 6,000 shares of common stock were issued at $18 for cash. f. Cash dividends declared and paid, $72,460. Required:

Explanation / Answer

Amelia Enterprises, Inc.

Statement of Cash Flows

For the Year Ended December 31, 2014

Cash Flows from Operating activities:

Net Income

$ 118,910

Adjustments to reconcile net income to net cash flows from operating activities:

Add: Depreciation

$ 33,500

Changes in current operating assets and liabilities:

Add: Decrease in Accounts Receivables (97340 - 90630)

$ 6,710

Less: Increase in Merchandise inventory (129480 - 120640)

$ (8,840)

Less: Increase in Prepaid Expenses (5270 - 3660)

$ (1,610)

Add: Increase in Accounts Payable (100700 -95510)

$ 5,190

Net Cash Flow from Operating activities

$ 153,860

Cash Flows from Investing activities:

Purchase of Equipment

$ (65,520)

Net Cash Used for Investing activities

$ (65,520)

Cash Flows from Financing activities:

Less: Mortgage Note Repaid

$ (137,100)

Add: Common Stock Issued (6000 Shares * $18)

$ 108,000

Less: Cash Dividend Paid

$ (72,460)

Net Cash Flow used in Financing activities

$ (101,560)

Net Change in cash

$ (13,220)

Add: Cash at beginning of the year

$ 72,200

Cash at end of the year

$ 58,980