Question

Problem 2: The following information is for Redwood Inc. for the year ended December 31, 2013. Redwood had a cash and cash equivalents balance of $5,200 on January 1, 2013. Cash received from Customers $ 1.900 Interest on investments 200 Sale of land 100 Sale of common stock 600 Issuance of debt securities 2,000 80 Cash paid for Interest on debt $ 300 Income tax Debt principal reduction 1.500 Purchase of equipment 4,100 Purchase of inventory 1,000 Dividends on common stock 200 Operating expenses 500 Required: Prepare a statement of cash flows for the year using the direct method.

Answer 1

Redwood INC

Statement of Cash Flow

For the Year Ended December 31, 2013

Cash flow from operating activities :
Collections from customers	$1,900
Interest on investments	200
Interest on debt	(300)
Payment of income tax	(80)
Purchase of inventory	(1,000)
Payment of operating expenses	(500)
Net cash inflow from operating activities		$220
Cash flow from investing activities:
Sale of land	100
Purchase of equipment	(4,100)
Net cash outflow from investing activities		(4,000)
Cash flow from financing activities:
Issuance of common stock	600
Issuance of debt securities	2,000
Payment of debt	(1,500)
Payment of dividends	(200)
Net cash inflow from financing activities		900
Net decrease in cash		(2,880)
Cash and cash equivalents, January 1		5,200
Cash and cash equivalents, December 31		$2,320