art One: Statement of Cash Flows Analysis You are given the following informatio
ID: 2756574 • Letter: A
Question
art One: Statement of Cash Flows Analysis
You are given the following information for Barko Industries:
Barko Industries
Balance Sheet (Partial)
Year 3
Year 4
$70,000
$9,640
70,000
85,000
87,000
84,000
48,000
51,000
Barko Industries
Income Statement
For the Year Ending December 31, Year 4
$560,000
$420,000
46,000
466,000
$94,000
$37,600
$56,400
Other Data:
Barko Industries sold an asset and recorded a loss on the sale of $8.700. The sale price was $220,000 and the asset was originally purchased for $360,000.
Dividends paid in Year 4 were $22, 460.
Required:
Prepare a statement of cash flows for the year ending December 31, Year 4 using the indirect method.
What conclusions could you arrive at regarding the cash position of the firm?
What information was provided in the statement of cash flows that was not evident if just the balance sheet and the income statement were examined?
ed?
Barko Industries
Balance Sheet (Partial)
Year 3
Year 4
Cash$70,000
$9,640
AR70,000
85,000
Inventories87,000
84,000
Accounts Payable48,000
51,000
Explanation / Answer
Cash Flow from Operating Activities Net Income 56400 Add : Depreciation Expenses 46000 Add : Loss on sale of asset 8700 111100 Add : Decrease in Inventories 3000 Add : Increase in Accounts Payable 3000 Less : Increase in AR 15000 Cash Generated from operations 102100 Cash Flow from Investing Activities Sale of the asset 220000 -140000 Purchase of the asset 360000 Cash Flow from Financing Activities Dividend Paid -22460 -22460 Net Increase in Cash and Cash Equivalents -60360.00 Cash and Cash Equivalents at the beginning of period 70000.00 Cash and cash equivalents at the end of the period 9640.00 The cash of the firm is decreasing a lot . One reason could be that the asset is being sold at the loss . Therefore, cash position of the firm is not good Cash Flows records and classify the transactions into operating, investing and financing activities of the business which is not prominently evident from Balance Sheet and Income statement
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