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The differences in Bravo Inc.\'s balance sheet accounts at December 31, year 2 a

ID: 2479336 • Letter: T

Question

The differences in Bravo Inc.'s balance sheet accounts at December 31, year 2 and year 1, are presented below.

Assets Increase (Decrease)

Cash and cash equivalents $120,000

Available-for-sale securities 300,000

Accounts receivable, net 0

Inventory 80,000

Long-term investments (100,000)

Plant assets 700,000

Accumulated depreciation 0

Total $1,100,000

Liabilities and Stockholders' Equity Increase (Decrease)

Accounts payable and accrued liabilities $(5,000)

Dividends payable 160,000

Short-term bank debt 325,000

Long-term debt 110,000

Common stock, $10 par 100,000

Additional paid-in capital 120,000

Retained earnings 290,000

Total $1,100,000

The following additional information relates to year 2:

> Net income was $790,000.

> Cash dividends of $500,000 were declared.

> Building costing $600,000 and having a carrying amount of $350,000 was sold for $350,000.

> Equipment costing $110,000 was acquired through issuance of long-term debt.

> A long-term investment was sold for $135,000. There were no other transactions affecting long-term investments.

> 10,000 shares of common stock were issued for $22 a share.

Prepare Bravo's year 2 Cash Flows from Operating Activities (section), using the indirect method:

Explanation / Answer

Bravo's Cash Flows from Operating Activities Particulars Amount Amount Net income $7,90,000 Adjustements to Net Income Increase in Inventory $80,000 Decrease in Accounts Payable -$5,000 $75,000 Cash Flow From Operating Activities $8,65,000

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