4. Use the following information to prepare a statement of cash flows for the ye

Question

4. Use the following information to prepare a statement of cash flows for the year ended December 31, 2016 using the indirect method. (10 po Hanson Inc. for ints) A. Net income $10,000 1. depreciation expense, $5,000; 2. inventory decrease, $1,000; 3. accounts receivable increase, $1,000; 4. accounts payable decrease, $2000. B. Sold equipment for $6,000. C. Paid cash dividend, $3,000. D. Paid long-term debt principal, $15,000. Purchased equipment for $11,000. F. Issued common stock received $25,000. E. The cash balance on January 1, 2016 was $10,000 and on December 31,2016 it was $25,000 Prepare a cash flow statement in good form using the indirect method.

Explanation / Answer

Answer:-

Hanson Inc. Statement of Cash Flow (Using Indirect Method) For the year ended December 31,2016 Particulars Amount $ $ Cash flow from opreating activities Net Income 10000 Adjustments to reconcile net income to net cash provided by opreating activities Adjustment for non cash effects Depreciation 5000 Change in opreating assets & liabilities Increase in Accounts Receiviable -1000 Decrease in Inventory 1000 Decrease in Accounts payable -2000 Net cash flow from opreating activities (a) 13000 Cash Flow from Financing activities Paid long-term debt principal -15000 Issue common stock 25000 Cash dividends paid -3000 Net cash Flow from Financing activities (b) 7000 Cash Flow from Investing activities Equipment sold 6000 Equipment purchased -11000 Net cash Flow from Investing activities (c) -5000 Net Channge in cash c=a+b+c 15000 Beginning cash balance 10000 Closing cash balance 25000

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