Question

Statement of Cash Flows—Indirect Method

The comparative balance sheet of Livers Inc. for December 31, 20Y3 and 20Y2, is shown as follows:

		Dec. 31, 20Y3		Dec. 31, 20Y2
Assets
Cash		$261,120		$243,460
Accounts receivable (net)		94,590		87,440
Inventories		267,040		258,890
Investments		0		100,300
Land		136,970		0
Equipment		294,620		228,890
Accumulated depreciation—equipment		(68,980)		(61,720)
	Total assets	$985,360		$857,260
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)		$178,350		$168,880
Accrued expenses payable (operating expenses)		17,740		22,290
Dividends payable		9,850		7,720
Common stock, $10 par		53,210		42,010
Paid-in capital: Excess of issue price over par-common stock		200,030		116,590
Retained earnings		526,180		499,770
	Total liabilities and stockholders’ equity	$985,360		$857,260

Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows:

1. The investments were sold for $117,350 cash.
2. Equipment and land were 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 $66,700 credit to Retained Earnings for net income.
6. There was a $40,290 debit to Retained Earnings for cash dividends declared.

Required:

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.

Livers Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y3
Cash flows from operating activities:
	$
Adjustments to reconcile net income to net cash flow from operating activities:
Changes in current operating assets and liabilities:
Net cash flow from operating activities		$
Cash flows from investing activities:
	$
Net cash flow used for investing activities
Cash flows from financing activities:
	$
Net cash flow from financing activities
		$
Cash at the beginning of the year
Cash at the end of the year		$

Answer 1

Working note 1 --Calculation of Cash Dividend paid
Opening Balance of Dividends Payable	7720.00
Add: Dividends Declared during the year	40290.00
Total Dividend Liability	48010.00
Less: Closing Balance of Dividends	9850.00
Dividends Paid in cash During the year	38160.00
Working note 2---Depreciation expense for the year
Closing Balance of Accumulated depreciation on equipment		68980.00
Less: Opening Balance of Accumulated depreciation onequipment		61720.00
Depreciation for the Year		7260.00
Statement of Cash Flows
For the Year Ended December 31,20Y3
A. Cash Flows from Operating Activity
Net Income		66700.00
Adjustments to reconcile net income to net cash flow fromoperating activities:
Depreciation expense	7260.00	7260
Profit on sale of Investment ( 117350- 100300)	17050.00	-17050
Changes in current operating assets and liabilities:
Increase in Inventory (267,040- 258,890)	8150.00	-8150
Increase in Accounts Payable (178350 - 168880)	9470.00	9470
Decrease in Accrued Expenses (17740- 22290)	-4550.00	-4550
Increase in Accounts Receivables ( 94590-87440)	7150.00	-7150
Net cash flow from Operating activities		46530.00
B. Cash flows from Investing Activities
Purchase of Land	-136970.00
Sale of Investment	117350.00
Purchase of Equipment	-65730.00
Net Cash Used for Investing activities		-85350.00
C. Cash Flows from Financing activities
Proceeds from Additional Paid in capital	83440.00
payments of dividends	-38160.00
Issue of Stock	11200.00
Net Cash flows from Financing activities		56480.00
Net Increase (Decrease) in Cash [A+B+C]		17660.00
Cash at the beginning		243460.00
Cash at the end		261120.00