Question

. Land was sold for $120. 2. Equipment was acquired for cash. 3. There were no disposals of equipment during the year. 4. The common stock was issued for cash. 5. There was a $62 credit to Retained Earnings for net income. 6. There was an $24 debit to Retained Earnings for cash dividends declared. Required: A. Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. Use the minus sign to indicate cash outflows, decreases in cash and a net cash outflow for each section, if required. B. Was the net cash flow from operations for Olson-Jones Industries Inc. more or less than net income? What is the source of this difference?

Dec. 31, 20Y2 Dec. 31, 20Y1 Assets 3 Cash $183.00 $14.00 Accounts receivable (net) 55.00 49.00 Inventories 117.00 99.00 6 Land 250.00 330.00 Equipment 205.00 175.00 Accumulated depreciation-equipment (42.00) (68.00) $742.00 Total assets $625.00 Liabilities and Stockholders' Equity 11 Accounts payable (merchandise creditors) 12 Dividends payable $51.00 $37.00 5.00 13 Common stock, $1 par 125.00 80.00 14 Paid-in capital: Excess of issue price over par-common stock 85.00 70.00 15 Retained earnings 476.00 438.00 Total liabilities and stockholders' equity $742.00 $625.00

Answer 1

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Format and Naming convention is not available, can be slightly different: Solution: A) Amount ($) $ 62 Cash flow Statement Particulars Cash flows from operating activities: Net Income Adjustments to reconcile net income to net cash provided by operating: Depreciation expense (68-42) Gain on Sale of land (80-120) Change in Current Operating Assets and Liabilities: Increase in accounts receivable Increase in inventory Increase in accounts payable -24 $ 38 $ 90 Net Cash flow from Operating Activities (A) Cash Flow from Investing Activities: Sale of land Purchase of equipment (175-205) Net Cash from Investing Activities (B) Cash Flow from Financing Activities: Payment of Cash Dividends (24-5) Issurance of common stock (125-80)+(85-70) Net cash from financing activities -C) Net Increase in Cash (A+B+C) Beginning Balance Cash at the End of period $ $ $ $ 41 169 14 183

B) Net Cash flow from Operating Activities is "Less" than net income. (Refer Part A) The sources of these differece are the non cash transactions and non operating items. (refer part A for all non cash and non operating items) The sources of these differece are the non cash transactions and non operating items: Gain on the sale of land Purchase of equipment Depreciation expense Changes in current operating assets and liabilities