Question

Condensed financial data of Monty Company for 2017 and 2016 are presented below. MONTY COMPANY COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2017 AND 2016 2017 2016 Cash $1,810 $1,160 Receivables 1,740 1,310 Inventory 1,630 1,890 Plant assets 1,910 1,720 Accumulated depreciation (1,220 ) (1,180 ) Long-term investments (held-to-maturity) 1,280 1,420 $7,150 $6,320 Accounts payable $1,220 $920 Accrued liabilities 190 240 Bonds payable 1,420 1,580 Common stock 1,940 1,730 Retained earnings 2,380 1,850 $7,150 $6,320 MONTY COMPANY INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017 Sales revenue $6,960 Cost of goods sold 4,780 Gross margin 2,180 Selling and administrative expenses 920 Income from operations 1,260 Other revenues and gains Gain on sale of investments 80 Income before tax 1,340 Income tax expense 550 Net income 790 Cash dividends 260 Income retained in business $530 Additional information: During the year, $70 of common stock was issued in exchange for plant assets. No plant assets were sold in 2017. Prepare a statement of cash flows using the indirect method.

Answer 1

MONTY COMPANY
Cash Flow Statement
For year ended 31st December 2017
A. Cash Flows from Operating Activity
Net Income		$      790.00
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense	$       40.00
Gain on sale of Investment	$     (80.00)
Changes in current operating assets and liabilities:
Increase in Accounts receivables	$   (430.00)
Increase in Accounts payables	$     300.00
Decrease in Inventory	$     260.00
Decrease in accrued liabilities	$     (50.00)
		$         40.00
Net cash flow from Operating activities		$      830.00
B. Cash flows from Investing Activities
Purchase of Plant assets	$   (120.00)
Sale of Investment	$     220.00
Net cash flow used for investing activities		$      100.00
C. Cash Flows from Financing activities
Cash received from sale of common stock	$     140.00
Cash paid for dividends	$   (260.00)
Repayments of Bonds payables	$   (160.00)
Cash flows from Financing activities		$    (280.00)
Net Increase (Decrease) in Cash [A+B+C]		$      650.00
Cash at the beginning		$   1,160.00
Cash at the end		$   1,810.00

General notes for cash flow

Cash is increased when Current liability increase or Current asset Decrease.

Cash is Decreased when Current liability Decrease or Current asset Increase.

Depreciation or loss on sale of any asset is a non cash expense hence it will be added to net income to get operating cash

Profit on sale of asset or investment is a non cash profit and hence will be deducted from operating income.