Statement of Cash Flows—Indirect Method The comparative balance sheet of Amelia
ID: 2500524 • Letter: S
Question
Statement of Cash Flows—Indirect Method
The comparative balance sheet of Amelia Enterprises, Inc. at December 31, 2014 and 2013, is as follows:
Additional data obtained from the income statement and from an examination of the accounts in the ledger for 2014 are as follows:
Net income, $184,270.
Depreciation reported on the income statement, $50,370.
Equipment was purchased at a cost of $98,090, and fully depreciated equipment costing $27,090 was discarded, with no salvage realized.
The mortgage note payable was not due until 2016, but the terms permitted earlier payment without penalty.
8,000 shares of common stock were issued at $20 for cash.
Cash dividends declared and paid, $112,290.
Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash and for any adjustments, if required.
Amelia Enterprises, Inc.
Statement of Cash Flows
For the Year Ended December 31, 2014
Cash flows from operating activities:
Common stock
Depreciation
Inventory
Net income
Prepaid expenses
Retained earnings
Correct 5
Correct 6
Adjustments to reconcile net income to net cash flow from operating activities:
Cash paid for dividends
Decrease in accounts receivable
Depreciation
Increase in accounts receivable
Net income
Retained earnings
Correct 8
Correct 9
Changes in current operating assets and liabilities:
Decrease in accounts payable
Decrease in accounts receivable
Decrease in inventory
Depreciation
Increase in accounts receivable
Correct 11
Correct 12
Decrease in accounts payable
Decrease in merchandise inventory
Decrease in prepaid expenses
Depreciation
Increase in accounts receivable
Increase in merchandise inventory
Correct 13
Correct 14
Decrease in accounts payable
Decrease in inventory
Decrease in prepaid expenses
Increase in prepaid expenses
Correct 15
Correct 16
Decrease in accounts payable
Decrease in prepaid expenses
Depreciation
Increase in accounts payable
Net income
Retained earnings
Correct 17
Correct 18
Net cash flow from operating activities
Correct 20
Cash flows from investing activities:
Cash paid for common stock
Cash paid for equipment
Cash paid for dividends
Cash paid for merchandise inventory
Cash paid for prepaid expenses
Cash paid to retire mortgage note
Correct 22
Correct 23
Net cash flow used for investing activities
Correct 25
Cash flows from financing activities:
Cash received from customers
Cash received from depreciation
Cash received from dividends
Cash received from net income
Cash received from retained earnings
Cash received from sale of common stock
Correct 27
Correct 28
Less cash paid for accounts payable
Less cash paid for common stock
Less cash paid for dividends
Less cash paid for equipment
Less cash paid for inventory
Less cash paid for prepaid expenses
Correct 29
Correct 30
Less cash paid for accounts payable
Less cash paid for accumulated depreciation
Less cash paid for common stock
Less cash paid for depreciation
Less cash paid for inventories
Less cash paid to retire mortgage note payable
Correct 31
Correct 32
Correct 33
Net cash flow used in financing activities
Correct 35
Decrease in cash
Increase in cash
Correct 36
Correct 37
Cash at beginning of the year
Correct 39
Cash at end of the year
Correct 41
Dec. 31, 2014 Dec. 31, 2013 Assets Cash $88,860 $109,010 Accounts receivable (net) 136,540 146,960 Merchandise inventory 195,070 182,140 Prepaid expenses 7,950 5,520 Equipment 397,350 326,350 Accumulated depreciation-equipment (103,310) (80,030) Total $722,460 $689,950 Liabilities and Stockholders' Equity Accounts payable (merchandise creditors) $151,720 $144,200 Mortgage note payable 0 206,990 Common stock, $1 par 22,000 14,000 Paid-in capital in excess of par-common stock 347,000 195,000 Retained earnings 201,740 129,760 Total $722,460 $689,950Explanation / Answer
Indirect Method - Cash flow
(a) Cash flow from operating activities = 210130
Net Income = 184270
+ Depreciation = 23,280
- Increase in Account Receivable = -10,420
- Increase in Inventories = 12,930
- Increase in Prepaid expense = 2430
+ Increase in Accounts payable = 7,520
(b) Cash flow from investing activities = -71,000
CAPEX = - 71,000
(c) CASH FLOW FROM FINANCING ACTIVITIES = -159280
Increase in common stock = 8,000
Securities premium = 152,000
Mortgag payment = -206990
Payment dividend = - 112,290
Bigning Cash = 109010
Change in cash = -20,150 (A+B+C)
Ending cash = 88860
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