Question

The comparative balance sheet of Livers Inc. for December 31, 20Y3 and 20Y2, is as follows:

1		Dec. 31, 20Y3	Dec. 31, 20Y2
2	Assets
3	Cash	$625,650.00	$586,340.00
4	Accounts receivable (net)	228,170.00	208,030.00
5	Inventories	641,480.00	617,130.00
6	Investments	0.00	240,290.00
7	Land	328,170.00	0.00
8	Equipment	706,070.00	552,300.00
9	Accumulated depreciation-equipment	(165,580.00)	(147,010.00)
10	Total assets	$2,363,960.00	$2,057,080.00
11	Liabilities and Stockholders’ Equity
12	Accounts payable (merchandise creditors)	$424,300.00	$404,860.00
13	Accrued expenses payable (operating expenses)	41,850.00	52,880.00
14	Dividends payable	23,200.00	19,880.00
15	Common stock, $2 par	150,000.00	100,000.00
16	Paid-in capital: Excess of issue price over par—common stock	417,500.00	280,000.00
17	Retained earnings	1,307,110.00	1,199,460.00
18	Total liabilities and stockholders’ equity	$2,363,960.00	$2,057,080.00

The income statement for the year ended December 31, 20Y3, is as follows:

1	Sales		$5,378,129.00
2	Cost of goods sold		3,306,510.00
3	Gross profit		$2,071,619.00
4	Operating expenses:
5	Depreciation expense	$18,570.00
6	Other operating expenses	1,755,879.00
7	Total operating expenses		1,774,449.00
8	Operating income		$297,170.00
9	Other income:
10	Gain on sale of investments		40,390.00
11	Income before income tax		$337,560.00
12	Income tax expense		133,650.00
13	Net income		$203,910.00

	a. The investments were sold for $280,680 cash.
	b. Equipment and land were acquired for cash.
	c. There were no disposals of equipment during the year.
	d. The common stock was issued for cash.
	e. There was a $96,260 debit to Retained Earnings for cash dividends declared.

Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities. Labels and Amount Descriptions

• Cash paid for dividends/purchase of equipment/purchase of land/treasury stock       
• Cash payments for income taxes/merchandise/operating expenses
• Cash received from customers/sale of common stock/sale of investments        
• Change in cash            
• Depreciation   
• Gain/Loss on sale of investments   
• Issuance of common stock for acquisition of land/for purchase of equipment           
• Net cash flow from financing/investing/operating activities          
• Net cash flow used for financing/investing/operating activities    

Answer 1

Livers Inc. Statement of Cashflows For the period ending 31.12.20Y3 Cashflow from Operating Activity Collection from Customers (5378129+208030-228170) Payments to Suppliers (3306510+641480-617130+404860-424300) Payments for expenses (1755879+52880-41850) Payment of Income Tax Cash generated from Operating Activity 5357989 -3311420 -1766909 -133650 146010 Cashflow from Investing Activity Land purchased Investments sold (240290 + 40390) Equipment purchased Cash used for Investing Activity -328170 280680 -153770 -201260 50000 137500 -92940 Cashflow from Financing Activity Common Stock issued Paid-in capital: Excess of issue price Dividends paid Cash generated from Financing Activity Net Increase in Cash Beginning Cash Balance Ending Cash Balance 94560 39310 586340 625650