Question

Burns Corporation's net income last year was $94,600. Changes in the company's balance sheet accounts for the year appear below:

	Increases (Decreases)
Asset and Contra-Asset Accounts:
Cash and cash equivalents	$	24,200
Accounts receivable	$	13,700
Inventory	$	(17,300	)
Prepaid expenses	$	4,300
Long-term investments	$	10,600
Property, plant, and equipment	$	71,400
Accumulated depreciation	$	32,600
Liability and Equity Accounts:
Accounts payable	$	(19,600	)
Accrued liabilities	$	17,400
Income taxes payable	$	4,400
Bonds payable	$	(62,400	)
Common stock	$	44,000
Retained earnings	$	90,500

The company did not dispose of any property, plant, and equipment, sell any long-term investments, issue any bonds payable, or repurchase any of its own common stock during the year. The company declared and paid a cash dividend of $4,100.

Required:

a. Prepare the operating activities section of the company's statement of cash flows for the year. (Use the indirect method.)

b. Prepare the investing activities section of the company's statement of cash flows for the year.

c. Prepare the financing activities section of the company's statement of cash flows for the year.

Answer 1

a) Operating activities under indirect method

Cash flow from operating activities
Net income	94600
Adjustment to reconcile net income to net cash flow from operating activities
Depreciation	32600
Increase account receivable	-13700
Decrease inventory	17300
Increase prepaid expense	-4300
Decrease account payable	-19600
Increase accrued liabilities	17400
Increase income tax payable	4400
Net cash flow from operating activities	128700

2) Cash flow from investing activities

Cash flow from investing activities
Purchase long term investment	-10600
Purchase Property, plant, and equipment	-71400
Net cash used in investing activities	-82000

3) Cash flow from financing activities

Cash flow from financing activities
Repaid bonds payable	-62400
Issue common Stock	44000
Dividend paid	-4100
Net cash used in financing activities	-22500