Question

On the basis of the following data for Breach Co. for the current and preceding years ended December 31, prepare a statement of cash flows using the indirect method. Assume that equipment costing $25,000 was purchased for cash and no long-term assets were sold during the period. Stock was issued for cash-3,200 shares at par. Net income for the current year was $76,000. Cash dividends declared and paid were $13,000. Current Year Prior Year Assets Cash Accounts Receivable (net) Inventories Equipment Accumulated Depreciation Total assets $ 170,000 78,000 106,500 395,000 (195,000) $ 554,500 $74,000 85,000 90,000 370,000 (158,000) $461,000 Liabilities and stockholders' equity Accounts Payable (merchandise creditors) Taxes Payable Common Stock, $10 par Retained Earnings Total Liabilities and Stockholders' Equity $51,000 2,500 262,000 239,000 $ 554,500 $50,000 5,000 230,000 176,000 $461,000 Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

Answer 1

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Naming convention is not available, can be slightly different: Solution: Amount ($) $ 76,000 Cash flow Statement Particulars Cash flows from operating activities: Net Income Adjustments to reconcile net income to net cash provided by operating: Depreciation expense Change in Current Operating Assets and Liabilities: Decrease in accounts receivable Increase in inventory Increase in accounts payable Decrease in Taxes payable $ 37,000 $ 7,000 $-16,500 $ 1,000 $ -2,500 $ 26,000 102000 $-25,000 $ -25,000 Net Cash flow from Operating Activities (A) Cash Flow from Investing Activities: Purchase of equipment Net Cash flow used for Investing Activities (B) Cash Flow from Financing Activities: Payment of Cash Dividends Issuance of common stock Net cash flow provided by financing activities -C) Net Increase in Cash (A+B+C) Cash at the beginning of the year Cash at the End of year $-13,000 $ 32,000 $ $ $ 19,000 96,000 74,000 170000