Question

1. The comparative balance sheet of Tru-Built Construction Inc. for December 31, 2016 and 2015, is as follows:

   		Dec. 31, 2016		Dec. 31, 2015
   Assets
   Cash		$110		$35
   Accounts receivable (net)		63		44
   Inventories		39		24
   Land		90		99
   Equipment		50		38
   Accumulated depreciation-equipment		(14)		(7)
   	Total Assets	$338		$233
   Liabilities and Stockholders' Equity
   Accounts payable (merchandise creditors)		$43		$35
   Dividends payable		7		-
   Common stock, $10 par		22		11
   Paid-in capital: Excess of issue price over par—common stock		55		27
   Retained earnings		211		160
   	Total liabilities and stockholders' equity	$338		$233

   The following additional information is taken from the records:

   1. Land was sold for $23.
   2. Equipment was acquired for cash.
   3. There were no disposals of equipment during the year.
   4. The common stock was issued for cash.
   5. There was a $73 credit to Retained Earnings for net income.
   6. There was a $22 debit to Retained Earnings for cash dividends declared.

   a. Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

   Tru-Built Construction Inc.
   Statement of Cash Flows
   For the Year Ended December 31, 2016
   Cash flows from operating activities:
   Cash received from sale of common stock Decrease in accounts receivable Increase in inventories Net income	$
   Adjustments to reconcile net income to net cash flow from operating activities:
   Decrease in accounts receivable Depreciation Increase in accounts receivable Loss on sale of land
   Decrease in inventories Gain on sale of land Increase in accounts payable Loss on sale of land
   Changes in current operating assets and liabilities:
   Decrease in accounts receivable Decrease in inventories Depreciation Increase in accounts receivable
   Decrease in accounts payable Decrease in accounts receivable Decrease in inventories Increase in inventories
   Cash paid for dividends Decrease in accounts payable Depreciation Increase in accounts payable
   Net cash flow from operating activities		$
   Cash flows from investing activities:
   Cash paid for dividends Cash received from sale of land Depreciation Gain on sale of land	$
   Less cash paid for purchase of equipment Less cash received from sale of common stock Less depreciation Less increase in inventories
   Net cash flow provided by investing activities
   Cash flows from financing activities:
   Cash received from sale of common stock Cash received from sale of land Decrease in accounts payable Depreciation	$
   Less cash paid for dividends Less cash received from sale of land Less decrease in inventories Less increase in accounts receivable
   Net cash flow provided by financing activities
   Decrease in cash Increase in cash		$
   Cash at the beginning of the year
   Cash at the end of the year		$

   b. Was Tru-Built Construction Inc.'s cash flow from operations more or less than net income?
   

   • Less
   • More

Answer 1

Answer-a)-

Tru-Built Construction
STATEMENT OF CASH FLOWS    (USING INDIRECT METHOD)
FOR THE YEAR ENDED DECEMBER 31,2016
Particulars		Amount
		$
Cash flow from operating activities
Net Income		73
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation		7
Gain on sale of land		-14
Change in operating assets & liabilities
Increase in accounts receivable		-19
Increase in inventories		-15
Increase in accounts payable		8
Increase in dividends payable		7
Net cash flow from operating activities (a)		47
Cash Flow from Investing activities
Land sold		23
Equipment purchased		-12
Net cash Flow from Investing activities (c)		11
Cash Flow from Financing activities
Cash dividends paid		-22
Common stock issued		39
Net cash Flow from Financing activities (b)		17
Net Change in cash c=a+b+c		75
Beginning cash balance		35
Closing cash balance		110

b)- Tru-Built Construction Inc.'s cash flow from operations was less than net income.