Question

Question 4 (20 marks) The comparative Balance Sheets and the Income statement for the Marine Corporation are as follow: Marine Corporation Balance Sheet Assets 2019 2020 Cash $45,000 $50,000 Marketable Securities 175.000 160,000 Accounts Receivable 240,000 220,000 inventories 230,000 275,000 Investments 70,000 55.000 Total current assets $760,000 $760,000 Plant and Equipment 1,300,000 1,550,000 Less Accumulated Amortization 450,000 600,000 Net plant and Equipment S850,000 $950,000 Total Assets 1.610,000 1.710,000 LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable S110,000 $85.000 Notes payable 65.000 10.000 Accrued Expenses 30,000 5.000 Income Taxes Payable 5.000 10.000 Bonds Payable (2016) 800,000 900,000 Common Stock (100,000 shares) 200.000 200,000 Retained Earnings 400.000 500,000 Total Liabilities and Shareholders' Equity 1.610.000 $1,700,000 Marine Corporation Income Statement For the Year Ended December 31, 2020 Sales S 5.500.000 Less: Cost of Goods Sold 4,200,000 Gross Profit 1.300,000 Less: Selling General & Administrative Expenses 260,000 Operating profit 1.040,000 Less: Amortization Expense 150,000 Famings Before Interest and Taxes 890,000 Less: Interest Expense 90,000 Earings Before Taxes 800,000 Less: Taxes (25%) 200,000 Net Income $ 600,000 Required: Prepare a Statement of Cash Flows in good form for the year ended December 31, 2020 using the Indirect Method?

Answer 1

Cash Flow statement for year ended December 31, 2020
Particulars	Amount in $
Cash flows from operating activities
Net Income	600,000
Adjustments to arrive cash flow from operating activities:
Amortization expense	150,000
Decrease in Marketable Securities	15,000	=175000-160000
Decrease in accounts receivables	20,000	=240000-220000
Increase in Inventories	-45,000	=230000-275000
Decrease in Investments	15,000	=70000-55000
Decrease in accounts payable	-25,000	=85000-110000
Decrease in notes payable	-55,000	=10000-65000
Decrease in accrued expenses	-25,000	=5000-30000
Increase in Income Tax payable	5,000	=10000-5000
Net Cash flow from operating activities	655,000
Cash flows from investing activities
Purchase of Plant & Equipment	-250,000	=1300000-1550000
Net Cash flow from Investing activities	-250,000
Cash flows from financing activities
Proceeds from issuance of Bonds Payable	100,000	=900000-800000
Payment of cash dividends	-500,000	=500000-600000-400000
Net Cash flows from financing activities	-400,000
Net increase(decrease) in cash and cash equivalents (A)	5,000
Cash and cash equivalents at beginning of period (B)	45,000
Cash and cash equivalents at end of period =A+B	50,000
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