Question

The following is the comparative balance sheet as of December 31, 2019 and 2018 and the income statement for the year ended December 31, 2019 for Lynbrook Inc.:

		Lynbrook Inc.
	Comparative Balance Sheet
	December 31, 2019 and 2018
Assets:		2019				2018
Cash	$ 39				$ 81
Accounts receivable	640				588
Inventory	650				610
Total current assets		1,329				1,279
Property, Plant & Equipment	1,505				1484
Less: Accumulated depreciation	(770)				(651)
Net Property, Plant & Equipment		735				833
Total Assets		$ 2,064				$ 2,112
Liabilities and Stockholders'
Equity
Current liabilities
Accounts payable	$ 260				$ 160
Accrued liabilities	180				170
Income tax payable	77				72
Total current liabilities		517				402
Bonds payable		415				600
Total liabilities		932				1,002
Shareholders' Equity:
Common stock		145				145
Retained earnings		987				965
Total stockholders' equity		1,132				1,110
Total Liabilities and Stockholder's
Equity		$ 2,064				$ 2,112
		Lynbrook Inc.
		Income Statement
	For the year ended December 31, 2019
Sales		$ 3,700
Cost of goods sold		2,540
Gross Margin		1,160
Selling and administrative expenses		880
Net operating income		280
Other income and expenses
Gain on sale of equipment		2
Income before taxes		282
Income tax expense		112
Net Income		$ 170

The accounting department at Lynbrook provided the additional information for you on the next page.

1. The company sold equipment that had an original cost of $12 million and accumulated depreciation of $7 million. The cash proceeds from the sale were $7 million. The gain on the sale was $2 million.

2. The company purchased equipment for cash during the year.

3. The company did not issue any new bonds during the year.

4. The company paid a cash dividend during the year.

5. The company did not issue or repurchase any shares of common stock during the year.

Required:

Prepare a complete statement of cash flows for the year (operating, investing, and financing). Use the indirect method to prepare the operating activities section of the statement.

Reminder: Continue using the excel HW policies for preparing your solutions to the above questions, including the standard four line heading.

Answer 1

Lynbrook Inc.
Statement of cash flow
As at December 31
Particulars	Amount ($)	Amount ($)
cash flow from operating activities
Net income		170
Adjustments
gain on sale of equipment	-2
Depreciation	126
Increase in account receivable (640-588)	-52
Increase in inventory (650-610)	-40
Increase in account payable (260-160)	100
Increase in accrued liabilities (180-170)	10
Increase in income tax payable (77-72)	5
		147
Net cash provided by operating activities		317
Cash flow from investing activities
Purchase of equipment	-33
sale of equipment	7
Net cash provided by investing activities		-26
Cash flow from financing activities
retirement of bonds payable (415-600)	-185
payment of cash dividend (965+170-987)	-148
Net cash provided by financing activities		-333
Net increase in cash		-42
Cash at the beginning		81
cash at end of period		39
Depreciation expense
770-651+7 = 126
purchase of equipment
1505-1484+12 = 33