Question

Statement of Cash Flows-Indirect Method The comparative balance sheet of Livers Inc. for December 31, 2013 and 20Y2, is shown as follows: Dec. 31, 20Y3 Dec. 31, 2012 Assets Cash Accounts receivable (net) $251,660 91,170 257,350 $235,180 84,470 250,070 96,890 Inventories Investments 0 Land 221,100 Equipment Accumulated depreciation equipment 132,000 283,950 (66,480) $949,650 (59,620) $828,090 Total assets Liabilities and Stockholders' Equity Accounts payable (merchandise creditors) Accrued expenses payable (operating expenses) $171,890 17,090 9,500 $163,130 21,530 7,450 40,580 Dividends payable Common stock, $10 par Paid-in capital: Excess of issue price over par-common stock Retained earnings 51,280 192,780 507,110 112,620 482,780 Total liabilities and stockholders' equity $949,650 $828,090 Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows: a. The investments were sold for $113,360 cash. b. Equipment and land were acquired for cash. c. There were no disposals of equipment during the year. d. The common stock was issued for cash. e. There was a $63,250 credit to Retained Earnings for net income. f. There was a $38,920 debit to Retained Earnings for cash dividends declared. Required: Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments. Livers Inc. Statement of Cash Flows For the Year Ended December 31, 2043 Cash flows from operating activities: Adjustments to reconcile net income to net cash flow from operating activities: Changes in current operating assets and liabilities: DO 20 D1 000 Net cash flow from operating activities Cash flows from investing activities: Net cash flow used for investing activities Cash flows from financing activities: Net cash flow from financing activities Cash at the beginning of the year Cash at the end of the year

Answer 1

Solution

Livers Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y3
A. Cash Flows from Operating Activity
Net Income	$ 63,250
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense	$ 6,860
Gain on sale of Investment	-$ 16,470
Changes in current operating assets and liabilities:
Increase in Accounts Receivables	-$ 6,700
Increase in Inventory	-$ 7,280
Increase in Accounts Payable	$ 8,760
Decrease in Accrued expenses	-$ 4,440
Net cash flow from Operating activities		$ 43,980
B. Cash flows from Investing Activities
Cash received from Sale of Investment	$ 113,360
Cash paid for Purchase of Land	-$ 1,32,000
Cash paid for Purchase of Equipment	-$ 62,850
Net Cash flows from Investing activities		-$ 81,490
C. Cash Flows from Financing activities
Cash received from sale of Common stock	$ 90,860
Cash paid for dividends	-$ 36,870
Cash flows from Financing activities		$ 53,990
Net Increase (Decrease) in Cash [A+B+C]		$ 16,480
Cash at the beginning		$ 235,180
Cash at the end		$ 251,660

Working

Calculation of Cash Dividend paid
Opening Balance of Dividends Payable	$ 7,450
Add: Dividends Declared during the year	$ 38,920
Total Dividend Liability	$ 46,370
Less: Closing Balance of Dividends	$ 9,500
Dividends Paid in cash During the year	$ 36,870

.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.