Question

Prepare a Cash Flow statement using indirect method

Robust Robots, Inc. Comparative Balance Sheet December 31, 2019 and 2018 Assets 2019 2018 Current Assets: Cash Accounts Receivable, net Merchandise Inventory Supplies Prepaid Insurance Total Current Assets $ $ $ $ $ 65,000 150,000 135,000 9,700 30,000 389,700 $ $ $ $ $ $ 80,000 100,000 70,000 500 10,000 260,500 Property, Plant, and Equipment: Equipment Less: Accumulated Depreciation - Equipment Total Property, Plant, and Equipment Total Assets 500,000 (80,000) 420,000 809,700 $ $ $ 240,000 (90,000) 150,000 410,500 4 Page

Answer 1

A Cash flow statement provides the following information:
1) Information about company's cash receipt and cash payment during an accounting period.
2) Information about company's operating, investing and financing activities.
3) Information access the company's liquidity, solvency and financing flexibility.
Under the indirect method, net income is converted operating cash flow by making adjustments for the transaction that effect net income but are non cash transactions. The adjustment includes eliminating non cash expenses, non operating items and the changes in the balance sheet account on account of accrual accounting events.
> Cash flow from operating activities (CFO), consists of the inflows and outflows of cash resulting from revenue and expense transactions that affect a firm's net income.
> Cash flow from investing activities (CFI) consists of the inflow and outflows of cash resulting from the acquisition of long term assets and investment.
> Cash Flow from financing activities (CFF) consists of the inflow and outflows of cash resulting from transactions affecting a firm's capital structure.

Amount $55,500 Robust Robots Inc Statement of Cash Flows For year ended December 31, 2019 Particulars Amount Cash Flow from Operating Activity Net Income before taxes Adjustment reconcile net income net cash flow from operating activities Add: Depreciation Expense $20,000 Add: Loss on Sale of Equipment $5,213 Increase in Accounts Receivable ($50,000) Increase in inventory ($65,000) Increase in supplies ($9,200) Increase in Prepiad Expense ($20,000) Increase in accounts payable $1,10,000 Decrease in Unearned revenue ($10,000) Increase in Salaries and wages payable $10,000 Changes in Working Capital Net Cash Flow from Operating Activity Cash Flow from (used for) Investing Activity Purchase of Equipment ($3,50,000) Sale of equipment $54,787 Net Cash Flow used in Investing Activity Cash Flow from (used for) Financing Activity Proceeds from Notes Payable $1,30,000 Proceeds from issue of common stock $1,13,700 Dividend paid ($10,000) Net Cash Flow from Financing Activity Net Decrease in Cash and Cash Equivalents Add: Cash at beginning of the year Cash at the end of the year ($8,987) $46,513 ($2,95,213) $2,33,700 ($15,000) $80,000 $65,000

Working 1 Accumulated Depreciation Expense OPening Balance Add: Depreciation Expense Less: Closing Balance Accumulated Depreciation on equipment sold $90,000 $20,000 ($80,000) $30,000 Cost of Equipment Sold Less: Accumulated Depreciation (70% x $29860] Carrying Value of Equipment less: loss on sale of eqipment Cash received from sale of equipment $90,000 ($30,000) $60,000 ($5,213) $54,787 2 Beginning Gross Equipment Less: Equipment Sold Less: Ending Gross Equipment Purchase of equipment $2,40,000 ($90,000) ($5,00,000) ($3,50,000) Particulars 2019 2018 Assets (A) Accounts Receivable $1,50,000 $1,00,000 inventory $1,35,000 $70,000 Supplies $9,700 $500 Prepaid Insurance $30,000 $10,000 Accounts Payable $1,50,000 $40,000 Unearned Revenue $40,000 $50,000 Income Tax Paybale $10,000 $10,000 Salaries and wages payable $40,000 $30,000 Increase in Current Assets is Cash Outflow and Decrease in Current Assets in Cash Inflow Increase in Current Liability is Cash Inflow and Decrease in Current Liability in Cash Outflow Increase /(Decrease) (A) - (B) $50,000 $65,000 $9,200 $20,000 $1,10,000 ($10,000) $10,000

$1,70,000 $43,700 $2,13,700 4 Issue of Common Stock Closing Balance Common Stock Paid in Capital - excess of par Less: Opening Balance Common Stock Paid in Capital - excess of par Issue of share $1,00,000 $0 ($1,00,000) $1,13,700