Question

Exercise 12-10 Shown below are comparative balance sheets for Ivanhoe Company. Ivanhoe Company Comparative Balance Sheets December 31 Assets 2022 Cash $ 142,800 Accounts receivable 184,800 Inventory 350,700 Land 168,000 Equipment 546,000 Accumulated depreciation-equipment (138,600 ) Total $1,253,700 Liabilities and Stockholders' Equity Accounts payable $81,900 Bonds payable 315,000 Common stock ($1 par) 453,600 Retained earnings 403,200 Total $1,253,700 2021 $ 46,200 159,600 396,900 210,000 420,000 (67,200 ) $1,165,500 $ 90,300 420,000 365,400 289,800 $1,165,500

Answer 1

A Cash flow statement provides the following information:
1) Information about company's cash receipt and cash payment during an accounting period.
2) Information about company's operating, investing and financing activities.
3) Information access the company's liquidity, solvency and financing flexibility.
Under the indirect method, net income is converted operating cash flow by making adjustments for the transaction that effect net income but are non cash transactions. The adjustment includes eliminating non cash expenses, non operating items and the changes in the balance sheet account on account of accrual accounting events.

Cash flow from operating activities (CFO), consists of the inflows and outflows of cash resulting from revenue and expense transactions that affect a firm's net income.

Cash flow from investing activities (CFI) consists of the inflow and outflows of cash resulting from the acquisition of long term assets and investment.

Cash Flow from financing activities (CFF) consists of the inflow and outflows of cash resulting from transactions affecting a firm's capital structure.

Amount $195,300 Ivanhoe Company Statement of Cash Flows For year ended December 31, 2022 Particulars Amount Cash Flow from Operating Activity Net Income Adjustment reconcile net income net cash flow from operating activities Add: Depreciation and Amortisation Expense $71,400 Increase in Accounts Receivable ($25,200) Decrease in inventory $46,200 Decrease in accounts payable ($8,400) Changes in Working Capital Net Cash from Operating Activity Cash Flow from (used for) Investing Activity Purchase of Equipment ($126,000) Sale of Land $42,000 Net Cash used in Investing Activity Cash Flow from (used for) Financing Activity Repayment of Bond payable ($105,000) Proceeds from issue of common stock $88,200 Dividend paid ($81,900) Net Cash used Financing Activity Net Decrease in Cash and Cash Equivalents Add : Opening Cash Closing Cash $84,000 $279,300 ($84,000) ($98,700) $96,600 $46,200 $142,800

Working Particulars Closing Balance Opening Balance (A) (B) Assets Accounts Receivable $184,800 $159,600 inventory $350,700 $396,900 Accounts Payable $81,900 $90,300 Increase in Current Assets is Cash Outflow and Decrease in Current Assets in Cash Inflow Increase in Current Liability is Cash Inflow and Decrease in Current Liability in Cash Outflow Increase /(Decrease) (A) - (B) $25,200 ($46,200) ($8,400)