Question

Shasta Inc. Statement of Cash Flows For the Year Ended December 31, 2049 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash flow from operating activities: $360,000 100,800 17,280 Depreciation Gain on sale of investments Changes in current operating assets and liabilities: Increase in accounts receivable Increase in inventories Increase in accounts payable 27,360 (36,000) (3,600) (2,400) Decrease in accrued expenses payable 5463,440 Net cash flow from operating activities Cash flows from investing activities: Cash received from sale of investments Cash paid for purchase of land Cash paid for purchase of equipment $240,000 (259,200) (432,000) (415,200) Net cash flow used for investing activities Cash flows from financing activities:

Answer 1

a.

	Item	Yes or No
1	Depreciation should be added to net income	Yes
2	Gain on sale of investments should be added to net income	No
3	Increase in accounts payable should be deducted from net income	No
4	Increase in accounts receivable should be added to net income	No
5	Cash paid for property, plant and equipment should be deducted under investing	Yes
6	Cash received from sale of common stock should be added under financing	Yes

b.

Cash from operating activities:
Net income	$360,000
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation	100,800
Gain on sale of investment	-17,280
Increase in accounts receivable	-27,360
Increase in inventories	-36,000
Increase in accounts payable	3,600
Decrease in accrued expenses payable	-2,400
Net cash flow from operating activities	381,360
Cash flow from investing activities:
Cash received from sale of investments	240,000
Cash paid for purchase of land	-259.200
Cash paid for purchase of equipment	-432,000
Net cash flow from investing activities	-451,200
Cash flow from financing activities:
Cash received from sale of common stock	312,000
Cash paid for dividends	-132,000
Net cash flow from financing activities	180,000
Change in cash	110,160
Cash at the beginning of the year	240,000
Cash at the end of the year	$350,160

Net cash flow from operating activities = $381,360

Net cash flow from investing activities = -$451,200

Net cash flow from financing activities = $180,000

c.

Change in cash = $110,160

Cash at the end of the year = $350,160