I am having trouble figuring out what the answer should be. Use the following in
ID: 2674809 • Letter: I
Question
I am having trouble figuring out what the answer should be.Use the following income statement and balance sheet information to put together a statement of cash flows.
2010
Sales $1,230,000
Cost of goods sold $684,000
Gross profit $546,000
General and administrative expense $159,000
Selling and marketing expense $134,000
Depreciation $25,000
Operating income $228,000
Interest $141,000
Income before taxes $87,000
Income taxes (27%) $23,490
Net income $63,510
Dividends paid $25,000
Assets 2010 2009
Cash $25,000 $21,990
Accounts receivable $125,000 $115,000
Inventory $200,000 $215,000
Total current assets $350,000 $351,990
Gross plant and equipment $700,000 $475,000
Less: accumulated depreciation $313,000 $288,000
Net plant and equipment $387,000 $187,000
Total assets $737,000 $538,990
Liabilities 2010 2009
Accounts payable $116,000 $103,000
Notes payable $29,000 $29,000
Total current liabilities $145,000 $132,000
Long-term debt $248,000 $152,000
Total liabilities $393,000 $284,000
Common stock ($.01 par) $4,500 $4,000
Paid-in capital $220,000 $170,500
Retained earnings $119,000 $80,490
Total stockholders
Explanation / Answer
Cash flow from operating activities 1.start with net income 2.subtract gains or add losses that resulted from financinf or investing cash flows 3.add back all non cash charges (depreciation or ammortization) and subtract non cash components of revenue 4.increase in operating asset accounts are subtracted and vice versa increase in liability accounts are added and vice versa netincome = $63510 depreciation = 25000 subtotal = 88510 change in operatin accounts increase in receivables = ($10000) decrease in inventories = $15000 increase in accounts payable = $13000 Cash Flow From Operations = $106510 Investing Cash Flow purchase of plant and equipment = ($225000) Financing Cash Flow sale of common stock = 500 paid in capital = 45000 dividends = (25000) total financing cash flow = 20500 Total Cash Flow CFo = 106510 CFI = (225000) CFF = 20500 total = (97990) this is indirect method of cash flow this method is ryt even if few mistakes might be there
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