the following information for 2014, 2013: Cash 44400, 20700 Account receivable,

Question

the following information for 2014, 2013:

Cash 44400, 20700

Account receivable, net 43300, 20300

Inventory 40000, 42000

Building 160000, 100000

Acuumulated depreciation-building (27700), (20000)

Equipment 61500, 50000

Accumulated depreciation-equipment (10000), (17,500)

Account payable 17000, 26500

Salaries payable 21000, 17000

Long term notes payable 100000, 50000

Common Stock 110000, 90000

Retained earnings 63500, 27000

Additonal data to 2014 are:

1- 10000 of the long term note payable was paid by cash

2- Equipment that had cost 15000 and had accumulated depreciation of 9500 at time of disposal was sold for 4000 in cash

3- Common stock was issued in exchange for 20000 cash

4- cash dividends were paid

5- Investments (available for sale) were sold for 28000

6- Cash of 26500 was paid for acquistion of equipment

7- Depreciation expense for the year is 9700

8- net income for the year is 56000

Prepare a statement of cash flows by using indirect method.

Explanation / Answer

Answer:

Statement of cash flow For the year Ended December 31,2014 Particulars Amount Cash flow from operating activities: Net income 56000 Adjustment to be reconcile net income to net cash provided by operating activities: Depreciation expense 9700 Loss on sale of equipment 1500 Increase in accounts receivable -23000 Decrease in merchandise inventory 2000 Decrease in accounts payable -9500 Increase in salaries payables 4000 Net cash flow from operating activities 40700 Cash flow from investing activities: Purchase of equipment -26500 Purchase of Building -52300 Sale of equipment 4000 Sale of investment 28000 Net cash flow from investing activities -46800 Cash flow from financing Activities: Cash Dividend paid -40200 Issue of common stock 20000 Payment of long term notes payable -10000 issue of Long term Notes payable 60000 Net cash flow from financing activities 29800 Net Increase in cash 23700 Cash at beginning of year 20700 Cash at end of year 44400

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