Question

A comparative balance sheet for Sandhill Corporation is presented as follows. Assets Cash Accounts receivable Inventory Land Equipment Accumulated Depreciation-Equipment Total Liabilities and Stockholders' Equity Accounts payable Bonds payable Common stock ($1 par) Retained earnings Total December 31 2020 2019 $ 72,890 $ 22,000 83.820 67,930 181,820 190,930 72,820 111,930 261,820 201,930 (70,820) (43,930) $602,350 $550,790 $ 35,820 150,000 214,000 202,530 $602,350 $ 48,930 200,000 164,000 137.860 $550,790 Additional information: 1. 2. 3. Net income for 2020 was $128,640. No gains or losses were recorded in 2020. Cash dividends of $63,970 were declared and paid. Bonds payable amounting to $50,000 were retired through issuance of common stock.

Answer 1

Solution

SANDHILL CORPORATION
Cash Flow Statement
For year ended 31st December 31 2019
A. Cash Flows from Operating Activity
Net Income		$              128,640
Adjustments to reconcile net income to
net cash flow from operating activities:
Depreciation expense	$                 26,890
Increase in Accounts receivables	$              (15,890)
Decrease in Inventory	$                   9,110
Decrease in accounts payables	$              (13,110)
		$                   7,000
Net cash flow from Operating activities		$              135,640
B. Cash flows from Investing Activities
Sale of land	$                 39,110
Purchase of Equipment	$              (59,890)
Net cash flow used for investing activities		$              (20,780)
C. Cash Flows from Financing activities
Cash paid for dividends	$              (63,970)
Cash flows from Financing activities		$              (63,970)
Net Increase (Decrease) in Cash [A+B+C]		$                 50,890
Cash at the beginning		$                 22,000
Cash at the end		$                 72,890
Non cash transaction
Issue of common stock to retire	$                 50,000	of bonds outstanding.