Statement of Cash Flows (Indirect Method) Use the following information regardin

Question

Statement of Cash Flows (Indirect Method) Use the following information regarding the Lund Corporation to (a) prepare flows using the indirect method and (b) compute Lund's operating-cash-flow-to-current-liabilities a statement of cash ratio. 16 $9,900 Accounts payable increase Accounts receivable increase Accrued liabilities decrease Amortization expense Cash balance, January1 Cash balance, December 31 Cash paid as dividends Cash paid to purchase land Cash paid to recire bonds payable at par Cash received from issuance of common stock Cash received from sale of equipment Depreciation expense Gain on sale of equipment Inventory decrease Net income Prepaid expenses increase Average current liabilities 21 3300 6,600 24,200 16,500 31,900 99,000 66,000 38,500 18,700 31,900 4 400 4,300 83,600 2,200 110,000 31 36 Finis Tim a. Use negative signs with cash outflow answers. LUND CORPORATION

Explanation / Answer

Lund Corporation

Lund Corporation

Statement of Cash Flow (Indirect Method)

For the Year Ended December 31

Cash flow from operating activities:

Net Income

$83,600

Add/(Deduct) items to convert net income to cash basis

Deprciation

$31,900

Amortization

$6,600

Gain on Sale of Equipment

($4,400)

Accounts Receivables Increase

($4,400)

Inventory Decrease

$14,300

Prepaid Expenses Increase

-2,200

Accounts Payable Increase

$9,900

Accrued Liabilities Decrease

-3,300

Cash Flow Provided by Operating Activities

$132,000

Cash Flow from Investing Activities:

Sale of Equipment

$18,700

Purchase of Land

($99,000)

Cash Used by Investing Activities

($80,300)

Cash Flow from Financing Activities;

Issuance of Common Stock

$38,500

Retirement of Bonds Payable

($66,000)

Payment of Dividends

($31,900)

Cash Used by Financing Activities

($59,400)

Net Decrease in Cash

($7,700)

Cash at Beginning of Year

$24,200

Cash at End of Year

$16,500

Operating cash flow to current liabilities = cash flow from operations/average current liabilities

Cash flow from operations = $132,000

Average current liabilities = $110,000

= $132,000/$110,000 =1.2

Hence, operating cash flow to current liabilities ratio = 1.2

Lund Corporation

Statement of Cash Flow (Indirect Method)

For the Year Ended December 31

Cash flow from operating activities:

Net Income

$83,600

Add/(Deduct) items to convert net income to cash basis

Deprciation

$31,900

Amortization

$6,600

Gain on Sale of Equipment

($4,400)

Accounts Receivables Increase

($4,400)

Inventory Decrease

$14,300

Prepaid Expenses Increase

-2,200

Accounts Payable Increase

$9,900

Accrued Liabilities Decrease

-3,300

Cash Flow Provided by Operating Activities

$132,000

Cash Flow from Investing Activities:

Sale of Equipment

$18,700

Purchase of Land

($99,000)

Cash Used by Investing Activities

($80,300)

Cash Flow from Financing Activities;

Issuance of Common Stock

$38,500

Retirement of Bonds Payable

($66,000)

Payment of Dividends

($31,900)

Cash Used by Financing Activities

($59,400)

Net Decrease in Cash

($7,700)

Cash at Beginning of Year

$24,200

Cash at End of Year

$16,500

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