Question

Statement of Cash Flows—Indirect Method

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

		Dec. 31, 20Y3		Dec. 31, 20Y2
Assets
Cash		$261,120		$243,460
Accounts receivable (net)		94,590		87,440
Inventories		267,040		258,890
Investments		0		100,300
Land		136,970		0
Equipment		294,620		228,890
Accumulated depreciation—equipment		(68,980)		(61,720)
	Total assets	$985,360		$857,260
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)		$178,350		$168,880
Accrued expenses payable (operating expenses)		17,740		22,290
Dividends payable		9,850		7,720
Common stock, $10 par		53,210		42,010
Paid-in capital: Excess of issue price over par-common stock		200,030		116,590
Retained earnings		526,180		499,770
	Total liabilities and stockholders’ equity	$985,360		$857,260

Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows:

1. The investments were sold for $117,350 cash.
2. Equipment and land were acquired for cash.
3. There were no disposals of equipment during the year.
4. The common stock was issued for cash.
5. There was a $66,700 credit to Retained Earnings for net income.
6. There was a $40,290 debit to Retained Earnings for cash dividends declared.

Required:

Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

Livers Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y3
Cash flows from operating activities:
	$
Adjustments to reconcile net income to net cash flow from operating activities:
Changes in current operating assets and liabilities:
Net cash flow from operating activities		$
Cash flows from investing activities:
	$
Net cash flow used for investing activities
Cash flows from financing activities:
	$
Net cash flow from financing activities
		$
Cash at the beginning of the year
Cash at the end of the year		$

Answer 1

Cash Flow Statement is as prepared below:

Livers Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y3
Cash flows from operating activities:
		66,700
Adjustments to reconcile net income to net cash flow from operating activities:
Gain on sale of investments	-17050
Depreciation	7260
Changes in current operating assets and liabilities:
Increase in accounts receivable	-7150
Increase in Inventory	-8150
Increase in accounts payable	9470
Decrease in accrued expenses	-4550
Net cash flow from operating activities		46530
Cash flows from investing activities:
Sale of investments	117,350
Purchase of equipment	-65730
Purchase of land	-136,970
Net cash flow used for investing activities		-85,350
Cash flows from financing activities:
Common Stock issued	94640
Cash dividend paid	-38,160
Net cash flow from financing activities		56,480
Net increase in cash and cash equivalents		17,660
Cash at the beginning of the year	243,460
Cash at the end of the year		261,120

Working:

Dividend Payable
Particulars	Amount ($)	Particulars	Amount ($)
Cash	38,160	opening	7,720
		Retained earning	40,290
	38160		48010
		closing	9,850
Retained earnings
Particulars	Amount ($)	Particulars	Amount ($)
Dividend	40,290	opening	499,770
		Net Income	66,700
	40290		566470
		closing	526,180