Question

Question 6

Comparative statements of financial position for Campbell Inc. appear below:

CAMPBELL INC.

Comparative Statements of Financial Position

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Assets

                                                                                                Dec. 31, 2016 Dec. 31, 2015

Cash                                                                                        $ 29,000         $10,000

Accounts receivable                                                                   28,000         19,000

Prepaid expenses                                                                         9,000         12,000

Merchandise inventory                                                               37,000         27,000

Long-term investments                                                               35,000         53,000

Equipment                                                                                   75,000         48,000

Accumulated depreciation—equipment                                   (26,000)        (22,000)

Total assets                                                                             $187,000         $174,000

Liabilities and Shareholders' Equity

Accounts payable                                                                   $ 21,000         $ 9,000

Mortgage payable                                                                       37,000         45,000

Common shares                                                                         40,000         23,000

Retained earnings                                                                       89,000         97,000

            Total liabilities and shareholders' equity                      $187,000         $174,000

Additional information regarding fiscal 2016:

1.         Profit for the year was $27,000.

2.         Cash dividends of $13,000 were declared and paid during the year.

3.         Long-term investments with a carrying amount of $53,000 were sold for $48,000 cash.

Instructions

Using the indirect method, prepare a statement of cash flows for the year ended December 31, 2016.

Answer 1

The statement of cash flow determines the changes in cash by calculating cash flow from operating, investing and financing activities.

indirect method:- operating activities section starts with net income and add back non cash expense and add/less changes in current assets and liabilities.investing activities records changes in non current assets like purchase of equipment. cash flow from financing activities records changes in non current liabilities like long term notes and equity section of balance sheet.

statement of cash flow

cash flow from operating activities
Net income	$27,000
adjustments
depreciation expense [26000-22000]	$4,000
Loss on sale of investment [53000 carrying amount-sale value48000]	$5,000
(increase)/decrease in account receivable [28000-19000]	($9,000)
(increase)/decrease in inventory [37000-27000]	($10,000)
(increase)/decrease in prepaid expense [12000-9000]	$3,000
increase/(decrease) in account payable [21000-9000]	$12,000
cash flow from operating activities [27000+4000+5000-9000-10000+3000+12000]		$32,000
cash flow from investing activities
cash paid for equipment purchased [75000-48000]	($27000)
cash received on sale of long term investments [53000-35000]	$18,000
net cash used in investing activities [48000-27000]		($9,000)
cash flow financing activities
cash paid for mortgage [45000-37000]	($8,000)
cash received from issuing stock [ 40000-23000]	$17,000
cash paid for dividend	($13,000)
Net cash used in financing activities [-8000+17000-13000]		($4,000)
net increase (decrease) in cash [32000-9000-4000]		$19,000
cash balance at the beginning of year		$10,000
cash balance at the end of year [19000+10000]		$29,000

NOTE 1 : - long term notes paid = beginning long term notes + issued - ending long term notes

=51750+ [99375 equipment purchased-cash paid 36000]-63500

=51,625$