Question

Statement of Cash Flows (Indirect Method) North Company's income statement and comparative balance sheets as of December 31 of 2019 and 2018 follow: NORTH COMPANY Income Statement For the Year Ended December 31, 2019 Sales Revenue $770.000 Cost of Goods Sold $550,000 Wages Expense 195,0DD Advertising Expense 31,000 Depreciation Expense 24,000 Interest Expense 20,000 Gain on Sale of Land (25,000) 795,000 Net Loss 125,000) NORTH COMPANY Balance Sheets Dec. 31, 2019 Dec 31, 2018 Assets Cash $80,000 $32,000 Accounts Receivable 42.000 49,000 Inventory 107,DDD 115,0aa Prepaid Advertising 10.000 14,000 Plant Assets 360.000 210,000 Accumulated Depreciation 180,000) (55,000) Total Assets $519.DDD $364.000 Liabilities and Stockholders' Equity Accounts Payable $19,000 $25,000 Interest Payable 6.DDD Bonds Payable 210,000 Common Stock 245,000 245,000 Retained Earnings 69,00D 94,000 Treasury Stock (30,000 Total Liabilities and Stockholders' Equity 519.000 $364,000 During 2019, North sold land for $70,000 cash that had originally cost $45,000, North also purchased equipment for cash, acquired treasury stock for cash, and issued bonds payable for cash. Accounts payable relate to merchandise purchases. Required a. Calculate the change in cash that occurred during 2019. b. Prepare a statement of cash flows using the indirect method. a. Change in Cash during 2019 $ 48,000 increase :

Answer 1

Solution

NORTH COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2019
Cash flows from operating activities:
Net loss		$   (25,000.00)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		$    24,000.00
Gain on sale of land		$   (25,000.00)
Accounts receivable	Decrease	$      7,000.00
Inventory	Decrease	$      8,000.00
Prwpaid advertising	Decrease	$      4,000.00
Accounts payable	Decrease	$     (6,000.00)
Interest payable	Increase	$      6,000.00
Net cash from Operating Activities		$     (7,000.00)
Cash flows from investing activities:
Sale of land		$    70,000.00
Purchase of plant assets		$ (1,95,000.00)
Net cash from Investing Activities		$ (1,25,000.00)
Cash flows from financing activities:
Issuance of bonds payable		$ 2,10,000.00
Purchase of treasury stock		$   (30,000.00)
Net cash from Financing Activities		$ 1,80,000.00
Net change in cash during the year		$    48,000.00
Add: Beginning cash balance		$    32,000.00
Ending cash balance		$    80,000.00