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The comparative balance sheet of Livers Inc. for December 31, 20Y3 and 20Y2, is as follows: Dec. 31, 20Y2 Dec. 31, 20Y3 Asset$424,300.00 $404,860.00 12 Accounts payable (merchandise creditors) 13 Accrued expenses payable (operating expenses) 41,850.03 Gross profit $2,071,619.00 4 Operating expenses: $18,570.00 Depreciation expense 5 Other operating expenses 1,755,879.00 Toa. The investments were sold for $280,680 cash. b. Equipment and land were acquired for cash. c. There were no disposals of eLabels and Amount Descriptions Labels and Amount Descriptions Cash paid for dividends Cash paid for purchase of equipment CasFor the Year Ended December 31, 20Y3 Gain on sale of investments Issuance of common stock for acquisition of land Issuance ofх Statement of Cash Flows Prepare a statement of cash flows, using the direct method of presenting cash flows from operatingCash flows from investing activities: 8 10 11 12 13 14 Cash flows from financing activities: 15 16 17 18 19 Cash at the begin

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Solution

Livers Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y3
A. Cash Flows from Operating Activity
Net Income $ 203,910
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense $ 18,570
Gain on sale of Investment -$ 40,390
Changes in current operating assets and liabilities:
Increase in Accounts Receivables -$ 20,140
Increase in Inventory -$ 24,350
Increase in Accounts Payable $ 19,440
Decrease in Accrued expenses -$ 11,030
Net cash flow from Operating activities $ 146,010
B. Cash flows from Investing Activities
Cash received from Sale of Investment $ 280,680
Cash paid for Purchase of Land -$ 3,28,170
Cash paid for Purchase of Equipment -$ 1,53,770
Net Cash flows from Investing activities -$ 2,01,260
C. Cash Flows from Financing activities
Cash received from sale of Common stock $ 187,500
Cash paid for dividends -$ 92,940
Cash flows from Financing activities $ 94,560
Net Increase (Decrease) in Cash [A+B+C] $ 39,310
Cash at the beginning $ 586,340
Cash at the end $ 625,650

Working note

Calculation of Cash Dividend paid
Opening Balance of Dividends Payable $ 19,880
Add: Dividends Declared during the year $ 96,260
Total Dividend Liability $ 116,140
Less: Closing Balance of Dividends $ 23,200
Dividends Paid in cash During the year $ 92,940

.General notes for cash flow
Cash is increased when Current liability increase or Current asset Decrease.
Cash is Decreased when Current liability Decrease or Current asset Increase.
Depreciation or loss on sale of any asset is a non cash expense hence it will be added to net income to get operating cash
Profit on sale of asset or investment is a non cash profit and hence will be deducted from operating income.

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