Question

Shown below are comparative statements of financial position for Novak Corporation.

NOVAK CORPORATION Statement of Financial Position December 31
Assets		2018			2017
Cash		$68,860			$20,300
Accounts receivable		84,070			75,690
Inventory		173,760			194,250
Land		79,120			100,930
Equipment		262,700			192,800
Accumulated depreciation – equipment		(64,900	)		(29,900	)
		$603,610			$554,070
Liabilities and Shareholders’ Equity
Accounts payable		$37,110			$44,140
Bonds payable		145,000			191,000
Common shares		214,450			169,710
Retained earnings		207,050			149,220
		$603,610			$554,070

Additional information:

1.		Net income for 2018 was $96,630. There were no gains or losses reported on the income statement.
2.		Cash dividends of $38,800 were declared and paid.
3.		Bonds payable amounting to $46,000 were redeemed for cash $46,000. The bonds were originally issued at face value (no premium or discount).
4.		Common shares were issued for $44,740 cash.
5.		No land was purchased during 2018.
6.		No equipment was disposed of during 2018.

Prepare a statement of cash flows for 2018 using the indirect method.

Answer 1

Statement of Cash Flows - Indirect Approach
	Amount in $	Amount in $
Net income		$             96,630
Cash flows from operating activities
Adjustments for reconcile the net income to:
Depreciation	$             35,000
Increase in account receivable	$              -8,380
Decrease in inventory	$             20,490
Decrease on account payable	$              -7,030
		$             40,080
Net cash from operating activities		$          1,36,710
Cash flows from investing activities
Purchase of Equipment	$            -69,900
Sale of land	$             21,810
Net cash used in investing activities		$            -48,090
Cash flows from Financing activities
Redumption of bonds payable	$            -46,000
Dividend Paid	$            -38,800
Issue of Common Stock	$             44,740
Net cash used in financing activities		$            -40,060
Net increase in cash and cash equivalents		$             48,560
Add :Cash and cash equivalents at beginning of period		$             20,300
Cash and cash equivalents at end of period		$             68,860