Question

Exercise 12-09 Here are comparative balance sheets for Larkspur, Inc.. Larkspur, Inc. Comparative Balance Sheets December 31 Assets 2020 2019 Cash Accounts receivable Inventory Land Equipment Accumulated depreciation-equipment Total $ 72,800 86,400 170,200 72,800 260,000 (66,500) $595,700 $ 33,300 71,300 186,700 101,600 200,000 (33,800) $559,100 Liabilities and Stockholders' Equity Accounts payable Bonds payable Common stock ($1 par) Retained earnings Total $ 35,000 150,800 215,200 194,700 $595,700 $ 47,200 203,600 173,000 135,300 $559,100 Additional information: 1. Net income for 2020 was $102,000. 2. Cash dividends of $42,600 were declared and paid. 3. Bonds payable amounting to $52,800 were redeemed for cash $52,800. 4. Common stock was issued for $42,200 cash. 5. No equipment was sold during 2020, but land was sold at cost. Prepare statement of cash flows for 2020 using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g.-15,000, or in parenthesis e.g. (15,000).)

Answer 1

Statement of cash flows: B с $102,000 A B Larkspur, Inc Statement of Cash Flows 1 For the Year Ended December 31, 2020 2 Cash flows from operating activities: 3 Net income Adjustments to reconcile net income to net cash flows 4 from operating activities: 5 Add: Depreciation expense $32.700 6 Less: Increase in accounts receivable ($15,100) 7 Add: Decrease in inventory $16,500 8 Less: Decrease in accounts payable ($12,200) 9 Net cash flows from operating activities 10 11 Cash flows from investing activities: 12 Sale of land $28,800 13 Purchase of equipment (560,000) 14 Net cash used in investing activities 15 16 Cash flows from financing activities: 17 Bonds redemeed (552,800) 18 Common stock issued $42,200 19 Dividend paid (S42.600) 20 Net cash used in financing activities 21 Net increase (decrease) in cash 22 Cash balance, beginning 23 Cash balance, ending $21.900 $123.900 (531,200) (S53.200 $39,500 $33,300 $72.800

Calculations are shown below: A B с Larkspur, Inc Statement of Cash Flows 1 For the Year Ended December 31, 2020 2 Cash flows from operating activities: 3 Net income 102000 Adjustments to reconcile net income to net cash 4 flows from operating activities: 5 Add: Depreciation expense =66500-33800 6 Less: Increase in accounts receivable =71300-86400 7 Add: Decrease in inventory =186700-170200 8 Less: Decrease in accounts payable =35000-47200 9 Net cash flows from operating activities =SUMB5B8) 10 =C3+C9 11 Cash flows from investing activities: 12 Sale of land =101600-72800 13 Purchase of equipment = 200000-260000 14 Net cash used in investing activities =B12+B13 15 16 Cash flows from financing activities: 17 Bonds redemeed -52800 18 Common stock issued 42200 19 Dividend paid - 42600 20 Net cash used in financing activities =SUM(B17:B19) 21 Net increase (decrease) in cash =C10+C14+C20 22 Cash balance, beginning 33300 23 Cash balance, ending =C21+C22