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 a statement of cash flows using the indirect method and (b) compute Lund's operating-cash-flow-to-current-liabilities ratio Accounts payable increase Accounts receivable increase Accrued liabilities decrease Amortization expense Cash balance, January 1 Cash balance, December 31 Cash paid as dividends Cash paid to purchase land Cash paid to retire 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 $11,000 4,000 3,000 7,000 22,000 16,000 31,000 90,000 60,000 35,000 17,000 29,000 5,000 13,000 78,000 3,000 120,000

Explanation / Answer

1) 2) Operating cash flow to current liabilities ratio = Operating cash flow/Average Current Liabilitiies LUND CORPORATION = $ 1,23,000 / $ 1,20,000 Statement of Cash flows   = 1.03 For the Year ended December 31 Cash flow from operating activities: Net Income $     78,000 Add (Substract) items to convert net income to cash basis: Depreciation $     29,000 Amortization $       7,000 Gain on sale of Equipment $     -5,000 Accounts Receivable Increaes $     -4,000 Inventory Decreases $     13,000 Prepaid Expenses Increase $     -3,000 Accounts Payable Increase $     11,000 Accrued Laibiilities decrease $     -3,000 Cash flow provided by operating activities $ 1,23,000 Cash flow from Investing Activities Cash paid to purchase land $   -90,000 Cash received from sale of equipment $     17,000 Cash flow used in Investing activities $   -73,000 Cash flow from financng activites Cash paid as dividend $   -31,000 Cash paid to retire bonds $   -60,000 cash recived from issuance of common stock $     35,000 Cash flow used in financng activites $   -56,000 Net Decrease in Cash $     -6,000 Cash at beginning of Year $     22,000 Cash at end of Year $     16,000

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