Question

III. Financial Statement Preparation: The Statement of Cash Flows

Company X
Income Statement
For the Year Ended 2018

Revenues         $300,000
Expenses          $210,000
Net Income      $90,000

Company X
Comparative Balance Sheet
                                                   12/31/18                            December 31

                                                                                                            2018             2017

Assets

Cash                                                                                                     $42,000     $10,000
Accounts Receivable                                                                               33,000       15,000
Investments (Marketable Securities)                                                         38,000       25,000
Truck                                                                                                     48,000        22,000
Computer                                                                                               19,000       12,000
Accumulated Depreciation                                                                      (7,300)       (3,500)
Total Assets                                                                                                 $172,700     $80,500

                                                Liabilities & Stockholders’ Equity
Accounts Payable                                                                                    $7,500     $14,000
Bonds Payable                                                                                        30,000       20,000
Total Liabilities                                                                                           $37,500      $34,000                             

                                                                       
Common Stock                                                                                     $82,000     $30,000
Retained Earnings                                                                                   53,200 16,500                        Total Stockholders’ Equity                                                                          $135,200 $46,500

Total Liabilities and Stockholders’ Equity                                        $172,700     $80,500

REQUIRED:

1. What amount was taken as depreciation expense?
2. What amount was paid as dividend?
3. Prepare a Statement of Cash Flows using the indirect method.

Answer 1

Answer- The amount was taken as depreciation expense = $3800.

Amount paid as dividends =Opening balance of retained earnings+ Net income-Closing balance of retained earnings

= $16500+$90000-$53200

= $53300

COMPANY X
STATEMENT OF CASH FLOWS (USING INDIRECT METHOD)
FOR THE YEAR ENDED 31 DECEMBER 2018
Particulars		Amount
		$
Cash flow from operating activities
Net Income		90000
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation		3800
Change in operating assets & liabilities
Increase in accounts receivable		-18000
Decrease in accounts payable		-6500
Net cash flow from operating activities (a)		69300
Cash Flow from Investing activities
New truck purchased		-26000
New computer purchased		-7000
Investments purchased		-13000
Net cash Flow from Investing activities (b)		-46000
Cash Flow from Financing activities
Cash dividends paid	($16500+$90000-$53200)	-53300
Common stock issued		52000
Bonds issued		10000
Net cash Flow from Financing activities (c)		8700
Net Change in cash c=a+b+c		32000
Beginning cash balance		10000
Closing cash balance		42000