The management team of Brimmer Brothers Inc. is preparing its annual financial s

Question

The management team of Brimmer Brothers Inc. is preparing its annual financial statements. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statements are summarized Current Year Prior Year Balance Sheet Assets Cash Accounts Receivable Merchandise Inventory Property And Equipment Less: Accumulated Depreciation 50,000 80,000 60,000 110,000 130,000) $ 72,000 70,000 65,000 60,000 115,000) Total Assets Liabilities: Accounts Payable Salaries and Wages Payable Notes Payable, Long-Term 10,000$ 12,000 1,000 60,000 2,000 50,000 Stockholders' Equity 100,000 108,000 80,000 99,000 Common Stock Retained Earnings Total Liabilities and Stockholders' Equity Income Statement Sales Cost of Goods Sold Depreciation Expense Other Expenses Net Income $200,000 110,000 15,000 50,000 25,000 Other information from the company's records includes the following Bought equipment for cash, $50,000 Paid $10,000 on long-term note payable Issued new shares of common stock for $20,000 cash Cash dividends of $16,000 were declared and paid to stockholders Accounts Payable arose from inventory purchases on credit. Income Tax Expense ($4,000) and Interest Expense ($3,000) were paid in full at the end of both years and are - " included in Other Expenses. Required Part a. Prepare the statement of cash flows using the indirect method. Include any supplemental disclosures Part b. Interpret the statement of cash flows by explaining the main sources and uses of cash during the year.

Explanation / Answer

Statement of cash flows Net Income 25000 Add : Depreciation 15000 Add : Interest on long term Notes payable 3000 Operating cash flow before working capital changes 43000 Increase in Accounts Receivable -10000 Decrease in Inventory 5000 Decrease in Accounts payable -2000 Increase in salary payable 1000 Cash from Operating Activities A 37000 Financing Activites Issuance of common stock 20000 Dividend payment -16000 Repayment of long term note payable -10000 Interest payment -3000 Cash flow from Financing Activites B -9000 Investing Activities Purchase of equipment -50000 Cash flow from Investing Activites C -50000 Net cash flow from All activites A+B+C -22000 Add : Opening cash balance 72000 Ending Cash balance 50000 Main sources of funds Common stock has been issued for $20000 Cash of $37000 has been generated from operations. Uses of funds Bought equipment for $50000 Used cash for repayment of Notes Payable, Long term and payment of interest & Dividend As net cash flows from all activities are negetive, it signifies that we have used $22000 of last year's cash to support the above payment We appreciate the rating of our answers Thank You

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