Question

Please use the attached balance sheet and income statements to calculate. Cash flow from operation activity for 2019 is 2018 2019 2018 2019 Assets Liabilities & Equity Current liabilities: Current assets: Cash and marketable securities $ 10 $ 5 19 Accounts receivable $ 5 Accrued wages and taxes 20 Accounts payable 36 Notes payable Inventory - $ 53 Total $ 61 Total $ 34 S 40 Fixed assets: $ 53 $ 57 Gross plant and equipment Less: Depreciation Net plant and equipment $ $ 88 11 $77 15 $ 92 $106 15 $91 15 $106 Long-term debt: Stockholders' equity: Preferred stock (2 million shares) Common stock and paid-in surplus (5 million shares) Retained earnings Total 2 11 $ 2 11 57 Other long-term assets Total $ 58 $ 70 Total Total liabilities and equity
Same Table for each question.

Thank you!

Answer 1

In calculating the cash flows statement from indirect method, we will start with the net income. We will add back the non cash item of depreciation in it. Then we will adjust the amount for increase or decrease in cash due to increase or decrease in current assets or current liabilities.Like, an increase in current assets will reduce cash, so we will deduct it and a decrease in current assets will increase cash, so we will add it. Similarly, an increase in current liabilities will increase cash, so it will be added and a decrease in current liabilities will reduce cash, so it will be deducted. Before proceeding with the cash flow statement, we will check for certain adjustments given as below:

(1) Purchase of plant & equipment calculation:

Ending gross plant & equipment: : $106

Less: Beginning plant & equipment:   ($88)

Plant & equipment purchased : $18

With the above adjustments, the cash flows from operating, investing and financing activities is given below:

Description	Amount	Amount
Operating activities:
Net income	16
Adjustments to reconcile net income
Add: Depreciation	4
Less: Increase in accounts receivable	(1)
Less: Increase in inventory	(7)
Add: Increase in accrued wages & taxes	4
Add: Increase in accounts payable	1
Add: Increase in notes payable	1
Cash flows from operating activities		18
Investing activities:
Purchase of plant & equipment	(18)
Cash flows from investing activities		(18)
Financing activities:
Proceeds from long term debt issue	4
Preferred stock dividends paid	(1)
common stock dividends paid	(3)
Cash flows from financing activities		0