Question

Question #7 Statement of Cash Flows-Indirect Method compilation (16 points) Use the following information to prepare a statement of cash flows for Stable Equipment Company for the year ended December 31, 2018. Use the indirect method for the operating activities section of the statement. Information: Net income for the year 2018 was $5,000. Depreciation expense included in net income was $8,000. Accounts receivable decreased $2,000, while inventories increased $4,000. Accounts payable decreased $7,000. During the year, a piece of land held for future expansion was sold for its book value of $8,000 and a new service truck was purchased for $14,000. The company borrowed $18,000 on a two-year note from the bank. Dividends of $6,000 were paid in cash. Preferred stock was issued to retire $7,000 of long-term notes payable. The beginning cash balance was $22,000 and the ending balance was $32,000. Required: On the answer sheet on the following page, prepare the Statement of Cash Flows in 2018 for Stable Equipment Company in good form using the indirect method for operating activities. You may not need to use every space provided on the sheet! Please show subtotals for each category of operating, investing, and financing activities, and report significant noncash investing and financing activities, if applicable.

Answer 1

Stable Equipment Company Statement of Cash Flow For the year ended December 31,2018 Cash flows from Operating Activities: Amount | Amount Net Income $ 5,000 Adjustments to net income to reconcile net income to net cash flows from Operating Activities: Depreciation expense $ 8,000 Decrease in Accounts Receivables $ 2,000 Increase in inventory S (4,000) Decrease in Accounts payable $ (7,000) $ (1,000) Net Cash from operating activities $ 4,000 Cash Flows from Investing Activities Cash from Sale of Land $ 8,000 Cash paid for the purchase of Truck $ (14,000) Net Cash used in Investting activities $ 6,000) 18,000 (6,000) Cash Flows from Financing Activities Cash borrowed through notes payable $ Dividend paid $ Net Cash used in Financing activities Net Increase (decrease) in Cash Cash , Beginning balance Cash , Ending Balance Non cash Investment and financing activities Issue of prefereed stock for the retirment of long term notes payable $ $ 12,000 10,000 22,000 32,000 S $ $ 7,000