Question

Statement of Cash Flows-Indirect Method The comparative balance sheet of Olson-Jones Industries Inc. for December 31, 2012 and 2041, is as follows: Dec. 31, 2012 Dec. 31, 20Y1 Assets Cash Accounts receivable (net) Inventories Land Equipment 175 (42) Accumulated depreciation-equipment Total assets $625 Liabilities and Stockholders' Equity Accounts payable (merchandise creditors) Dividends payable Common stock, $1 par Pald-in capital: Excess of issue price over par- common stock Retained earnings Total liabilities and stockholders' equity 742 5625

Answer 1

A)

Olson - Jones Industries Inc

Statement of cash flows

For the year ended December 31 , 20Y2

Cash flows from operating activities	$	$
Net profit during the year	62
Adjustment to reconcile net income to net cash flow from operating activities
Depreciation [ $ 68 - $ 42]	26
Gain on sale of land [ 120 - ( 330 - 250)]	(40)
Change in current operating assets and liabilities
Increase in account receivables [ $ 55 - $ 49]	(6)
Increase in inventory [ $ 117 - $ 99]	(18)
Increase in account payable [ $ 51- $ 37]	14
Net cash flow from operating activities		38
Cash flow from ( used) investing activities
Sale proceed of land	120
Purchase of equipment [ $ 205 - $ 175]	(30)
Net cash flow from investing activities		90
Cash flow from financing activities
Issue of common stock at a premium [ $ 125 - $ 80] + [ $ 85 - $ 70]	60
Dividend paid [ 26 - 5]	(19)
Net cash flow from financing activities		41
Net cash flow from all three activities		169
Cash at the beginning of the year		14
Cash at the end of the year		183

B) Net cash flow from operation ( $ 38) is lower than net income ( $ 62)