Question

Statement of Cash Flows-Indirect Method The following balances are available for Chrisman Company: Cash Accounts receivable Inventory Prepaid rent Land Plant and equipment Accumulated depreciation Totals December 31 2017 2016 $8,600 $10,800 21,500 16,100 17,100 28,600 9,700 6,500 80,600 80,600 430,000 322,500 (69,900) (32,300) $497,600 $432,800 Accounts payable Income taxes payable Short-term notes payable Bonds payable Common stock Retained earnings Totals $12,900 3,200 37,600 81,000 215,000 147,900 $497,600 $10,800 5,400 26,900 108,000 161,300 120,400 $432,800 Bonds were retired during 2017 at face value, plant and equipment were acquired for cash, and common stock was issued for cash. Depreciation expense for the year was $37,600. Net income was reported at $27,500.

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Answer 1

Solution

Chrisman Company
Statement of Cash Flows
For the Year ended December 31 , 2017
A. Cash Flows from Operating Activity
Net Income		$          27,500.00
Adjustments to reconcile net income to net cash flows from Operating Activities
Depreciation expense		$          37,600.00
Increase in Accounts Receivable		$          (5,400.00)
Decrease in Inventory		$          11,500.00
Increase in Prepaid Rent		$          (3,200.00)
Increase in Accounts Payable		$            2,100.00
Decrease in Income taxes payable		$          (2,200.00)
Net cash flow from Operating activities		$          67,900.00
B. Cash flows from Investing Activities
Acquisition of Equipment		$     (107,500.00)
Net Cash Used in Investing activities		$     (107,500.00)
C. Cash Flows from Financing activities
Retirement of Bonds		$        (27,000.00)
Proceeds from Issue of Common stock		$          53,700.00
Cash proceeds from notes payable		$          10,700.00
Cash flows from Financing activities		$          37,400.00
Net Increase (Decrease) in Cash [A+B+C]		$          (2,200.00)
Cash at the beginning		$          10,800.00
Cash at the end		$            8,600.00

.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.