Question

Question 16 A comparative balance sheet for Rocker Company appears below: Dec. 31, 2019 ROCKER COMPANY Comparative Balance Sheet Dec. 31, 2020 Assets Cash $34,000 Accounts receivable 18,000 Inventory 25,000 Prepaid expenses 6,000 Long-term investments Equipment 60,000 Accumulated depreciation-equipment (20,000) Total assets $123,000 Liabilities and Stockholder's Equity Accounts payable $17,000 Bonds payable 36,000 Common stock 40,000 Retained earnings 30,000 Total liabilities and stockholders' equity $123,000 $11,000 13,000 17,000 9,000 17,000 33,000 (15,000) $85,000 $7,000 45,000 23,000 10,000 $85,000

Answer 1

Statement of cash flow is the statement of changes in cash during the year.it is bifurcated into three parts

(1) Cash flow from operating activities (2) cash flow from financing activities (3) Cash flow from investing activities.

Cash flow from operating activities
Net Income		$35,000
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation expense (20,000-15,000)	$5,000
Loss on sale of long term investments (17,000-14,000)	$3,000
Increase in account receivables (18,000-13,000)	($5,000)
Decrease in prepaid expense (9,000-6,000)	$3,000
Increase in inventories (25,000-7,000)	($8,000)
Increase in account payable (17,000-7,000)	$10,000
		$8,000(5000+3000-5000+3000-8000+10000)
Net cash provided by operating activities		$43,000
Cash inflow from investing activities
sale of long term investment	$14,000
Purchase of equipment*	($27,000)
Net cash used by investing activities		($13,000)
Cash flow from financing activities
Issuance of common stock	$17,000 [40,000-23,000]
retirement of bonds payable	($9,000)[45,000-36,000]
payment of cash dividend	(15,000)
Net cash used by financing activities		($7,000)
Net increase in cash		$23,000(43,000-13,000-7,000)
Cash at beginning of period		$11,000
Cash at the en of period		$34,000 (23,000+11,000)

*Equipment purchased = Ending equipment + equipment sold-Beginning equipment

$60,000-$33,000

=$27,000