The following balances are available for Chrisman Company: December 31 2010 2009

Question

The following balances are available for Chrisman Company:
December 31
2010 2009
Cash $ 8,000 $ 10,000
Accounts receivable 20,000 15,000
Inventory 15,000 25,000
Prepaid rent 9,000 6,000
Land 75,000 75,000
Plant and equipment 400,000 300,000
Accumulated depreciation (65,000) (30,000)
Totals $ 462,000 $ 401,000
Accounts payable $ 12,000 $ 10,000
Income taxes payable 3,000 5,000
Short-term notes payable 35,000 25,000
Bonds payable 75,000 100,000
Common stock 200,000 150,000
Retained earnings 137,000 111,000
Totals $ 462,000 $ 401,000

Bonds were retired during 2010 at face value, plant and equipment were acquired for cash, and common stock was issued for cash. Depreciation expense for the year was $35,000. Net income was reported at $26,000.
Required
1. Prepare a statement of cash flows for 2010 using the indirect method in the Operating Activities section.
2. Did Chrisman generate sufficient cash from operations to pay for its investing activities? How did it generate cash other than from operation? Explain your answers.

Explanation / Answer

statement of cash flow( indirect method ) operating activities Net income $26,000 Depreciation expenses $35,000 increase in accounts receivable ($5,000) Decrease in inventory $5,000 Increase in prepaid rent ($3,000) increase in accounts payable $3,000 Decrease in tax payable ($2,000) increase in short term notes payable $10,000 Net cash provided by operating activities $69,000 2 Chrisman did not generate the sufficient cash from opertions to pay the investing activities. To pay the investing activities 1. issued common stock of $50000 during the year

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