Question

Burns Corporation's net income last year was $94,600. Changes in the company's balance sheet accounts for the year appear below Increases (Decreases) Asset and Contra-Asset ccounts Cash and cash 18,400 equivalents Accounts receivable $14,300 (16,600) 4,200 $10,500 Inventory Prepaid expеnses Long-term investments Property, Plant, and equipment Accumulated depreciation Liability and Equity ccount5 Accounts payable Accrued liabilities 71,400 32,600 $(19,400) 16,800 4,100 Income taxes payable Bonds payable (63,000) 40,800 $90,300 Common stock Retained earnings The company did not disposse of any property, plant, and equipment, sell any long-term investments, Issue any bonds payable, or repurchase any of its own common stock during the year. The company declared and paid a cash dividend of $4,300 Required: a. Prepare the operating activities section of the company's statement of cash flows for the year. (Use the indirect method) b. Prepare the investing activities section of the company's statement of cash flows for the year. c. Prepare the financing activities section of the company's statement of cash flows for the year Complete this question by entering your answers in the tabs below. Required Required Required A В C Prepare the operating activities section of the company's statement of cash flows for the year. (Use the indirect method.) (Amounts to be deducted and cash outflows should be indicated with a minus sign.) Operating activities: Net income Adjustments: 0 0 S Required B Required A Оо

Answer 1

The statement of cash flow determines the changes in cash by calculating cash flow from operating, investing and financing activities.

indirect method:- operating activities section starts with net income and add back non cash expense and add/less changes in current assets and liabilities. Investing activities records changes in non current assets like purchase of equipment. cash flow from financing activities records changes in non current liabilities like long term notes and equity section of balance sheet.

1. operating activites

increase in assets = decrease in cash

decrease in asset = increase in cash

increase in liability = Increase in cash

decrease in liability = decrease in cash

Net income		$94,600
Adjustments
depreciation charge	$32,600
increase in accounts receivable	($14,300)
decrease in inventory	$16,600
increase in prepaid expense	($4,200)
decrease in accounts payable	($19,400)
increase in accrued liabilities	$16,800
increase in taxes payable	$4,100	$32,200[32600-14300+16600-4200-19400+16800+4100]
Net cash provided by operating activites		$126,800 [32200+94600]

2.investing activity section

cash flow from investing activties
increase in long term investment	$(10,500)
increase in property plant and equipment	($71,400)
Net cash used in investing activites [10500+71400]	($81,900)

3.financing activites

cash flow from financing activites
Decrease in Bonds Payable	($63,000)
increase in common stock	$40,800
dividends paid	($4,300)
Net cash used in investing activites [-63000+40800-4300]	($26,500)

net changes in cash = cash flow from operating activities+ investing activities + financing activities

=$126800 - $81900 -$26500

= $18,400