Question

Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows: Cash Accounts receivable Inventory Property, plant, and equipment Less accumulated depreciation Ending Beginning Balance Balance $ 93,800 $ 112,450 75,600 81,400 101,500 92,500 270,000 259,000 (90,000) (64,750) Total assets $ 450,900 $ 480,600 $ Accounts payable Income taxes payable Bonds payable Common stock Retained earnings 59,200 $ 105,200 46,000 59,900 111,000 92,500 129,500 111,000 105,200 112,000 Total liabilities and stockholders' equity $ 450,900 $ 480,600 During the year Ravenna paid a $11,100 cash dividend and it sold a piece of equipment for $5,550 that had originally cost $12,600 and had accumulated depreciation of $8,400. The company did not retire any bonds or repurchase any of its own common stock during the year. Required: What is the amount of net cash provided by (used in) operating activities in the company's statement of cash flows? (Input the amount as positive value.) Net cash (Click to select) operating activities $

Answer 1

1.)

Cash flow statement (Operating Activities)

Net Profit	4,300
Add: Depreciation (90,000 - 64,750)	25,250
Add: Profit from sale of equipment	1,300
Add: Decrease in Account receivable	5,800
Less: Increase in inventory	(9,000)
Less: Decrease in Account payable	(46,000)
Less: Decrease in income tax payable	(13,900)
Cash flow used in operating activities	$32,250

Net income = change in retained earnings + dividend paid

= (105,200 - 112,000) + 11,100 = $4,300

Profit from sale of equipment = 5,500 - (12,600 - 8,400) = $1,300

2.) Net cash provided by operating activities is $228,700

Cash flow from Operating Activities :-

= Net Income + depreciation + decrease in account receivable + increase in account payable

= 181,000 + 5,700 + 27,500 + 14,500

= $228,700