EXERCISE 13-7 Prepare a Statement of Cash Flows (Indirect Method) Comparative fi

Question

EXERCISE 13-7 Prepare a Statement of Cash Flows (Indirect Method) Comparative financial statement data for Holly Company are given (LO2, LO3) December 3 2002 2001 Cash Accounts receivable 36 75 210 29 61 180 Plant and equipment (40 (30) . $285 Accounts payable. . . $ 45 90 $247 $ 39 70 138 $247 Common stock Total liabilities and stockholders' equity . . . . . . . . $285 For 2002, the company reported net income as follows: Sales $500 200 Net income Dividends of $8 were declared and paid during 2002. There were no sales of plant and equipment during the year Required: Using the indirect method, prepare a statement of cash flows for 2002.

Explanation / Answer

Using direct method convert the company's income statement to cash basis :

Cash flow from operating activities Cash collection from customer (29+500-36) 493 Cash paid to supplier (300+75-61+39-45) -308 Cash paid for operating expense (180-10) -170 Net cash flow from operating activities 15

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