Additional data obtained from the income statement and from an examination of th

Question

Additional data obtained from the income statement and from an examination of the accounts in the ledger for 2013 are as follows:

Additional data obtained from the income statement and from an examination of the accounts in the ledger for 2013 are as follows: Net income, $220,500. Depreciation reported on the income statement, $72,975. Equipment was purchased at a cost of $142,450, and fully depreciated equipment costing $39,200 was discarded, with no salvage realized. The mortgage note payable was not due until 2014, but the terms permitted earlier payment without penalty. 7,000 shares of common stock were issued at $35 for cash. Cash dividends declared and paid, $134,400.

Explanation / Answer

Statement of cash flows
Operating activities
220,500 net income
+ 72,975 depreciation
+ 15,225 decrease in A/R
- 19,600 increase in inventory
- 3,325 increase in prepaid expenses
+ 11,025 increase in A/P
= $296,800 cash flow from operating activities

Investing activities
- 142,450 purchase of equipment
= ($142,450) cash used by investing activities

Financing activities
-294,000 payment of mortgage note
+ 245,000 issuance of common stock
- 134,400 payment of dividends
= ($183,400) cash used by financing activities

296,800 - 142,450 - 183,400 = ($29,050) cash used by all activities
+ 157,325 beginning cash balance
= $128,275 ending cash balance

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