Question

Problem 2 (15%): Statement of Cash Flows The income statement for the year ended December 31, 2019 and the balance sheet on December 31. 2019 and 2018 are presented below for Brown Company. Prepare the statement of cash flows for 2019 using the indirect method. Brown Company Income Statement For the Year Ended December 31, 2019 Revenues COGS Depreciation expense Other operating expenses Income before income taxes Income tax expense Net income $6,500 2,200 800 2.700 800 350 $450 Brown Company Balance Sheet December 31, 2019 and 2018 2019 2018 Assets: Cash A/R Inventories Net Plant & Equip. Total Assets $650 770 835 1,450 $3705 $130 610 870 1,770 $3380 Liabilities & Equity: A/P LT debt Common Stock Retained Total Liab. & Equity $520 375 1,260 1,550 $3.705 $500 320 1,260 1.300 $3.380 WRITE YOUR ANSWER BELOW THIS LINE

Answer 1

BROWN COMPANY

Statement of Cashflows

for the year ended 2019

Cash Flow from Operating Activities Net Income before Non-cash and Non-Operating Activities 450 Add: Non-cash and Non-Operating Activities Depreciation expense 800 Change in Working Capital Inventory 35 Accounts Payable 20 Accounts Receivable (160) Cash Flow from Operating Activities 1,145 Cash Flow from Investing Activities Plant and Equipment Purchased (WN1) (480) Cash Flow from Investing Activities (480) Cash Flow from Financing Activities Proceeds from L/T debt 55 Dividends paid (WN2) (200) Cash Flow from Financing Activities (145) Net Increase (decrease) in Cash 520

.

Working Note 1:

Plant and Equipment Account

	($)		($)
To Balance (opening)	1,770
To Cash (balancing figure) (Plant purchased)	480	By Depreciation (given)	800
		By Balance (closing)	1,450
	2,250		2,250

.

Working Note 2:

Dividends paid

Opening Retained Earnings	1,300
Add: Net Income	450
Less: Closing Retained Earnings	(1,550)
Dividends paid	200