Question

Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows:

	Ending Balance			Beginning Balance
Cash and cash equivalents	$	56,200		$	66,950
Accounts receivable		47,100			50,600
Inventory		63,200			57,500
Total current assets		166,500			175,050
Property, plant, and equipment		171,000			161,000
Less accumulated depreciation		57,000			40,250
Net property, plant, and equipment		114,000			120,750
Total assets	$	280,500		$	295,800
Accounts payable	$	36,800		$	65,500
Income taxes payable		28,700			33,800
Bonds payable		69,000			57,500
Common stock		80,500			69,000
Retained earnings		65,500			70,000
Total liabilities and stockholders’ equity	$	280,500		$	295,800

During the year, Ravenna paid a $6,900 cash dividend and it sold a piece of equipment for $3,450 that had originally cost $7,200 and had accumulated depreciation of $4,800. The company did not retire any bonds or repurchase any of its own common stock during the year. Answer the following 3 parts.

3. How much depreciation would the company add to net income on its statement of cash flows?

2. What net income would the company include on its statement of cash flows?

1. What is the amount of the net increase or decrease in cash and cash equivalents that would be shown on the company’s statement of cash flows?

Answer 1

3)
	Accumulated dep-ending					57,000
	Accumulated dep-opening				40,250
	less on sold equipment				-4800	35,450
	depreciation expense					21,550	answer
2)	net income
	retained earnings -closing					65,500
	Retained earnings -opening				70000
	less dividend paid				-6900	63100
	net income for the year					2,400
1)	net decrease in cash					10750
	(66950-56,200)