Statement of Cash Flows-Indirect Method The comparatlve balance sheet of Olson-J

Question

Statement of Cash Flows-Indirect Method The comparatlve balance sheet of Olson-Jones Industries Inc. for December 31, 20Y2 and 20Y1, is as follows Dec. 31, 20Y2 Dec. 31, 20Y1 Assets Cash Accounts recelvable (net) Inventories Land Equipment Accumulated depreclation-equipment $139 78 49 112 63 (17) $424 $43 54 123 47 $288 Total Assets Liabilities and Stockholders' Equity Accounts payable (merchandise creditors) Dividends payable Common stock, $1 par Pald-In capltal: Excess of Issue price over par-- common stock Retalned earnings $53 $43 28 14 75 34 260 197 Total llabllitles and stockholders' equlty $424 $288 The following additional Information Is taken from the records 1. Land was sold for $28 2. Equipment was acquired for cash. 3. There were no disposals of equipment during the year 4. The common stock was Issued for cash 5. There was a $91 credit to Retalned Earnings for net Income. 6. There was a $28 debit to Retalned Earnings for cash divldends declared

Explanation / Answer

Olson-Jones Industries

Cash flow statement (Indirect method)

Olson-Jones Industries Inc

Statement of Cash Flows

for the year ended December 31, 20Y2

Cash flow from operating activities:

net income

$91

Adjustments to reconcile net income to net cash flow from operating activities:

Depreciation

$8

Gain in sale of land

($17)

Changes in current operating assets and liabilities:

Increase in accounts receivable

($24)

Increase in inventory

($19)

Increase in accounts payable

$10

($42)

Cash flow from operating activities:

$49

Cash flow from investing activities:

Cash from sale of land

$28

purchase of equipment

($16)

Cash flow from investing activities:

$12

Cash flow from financing activities:

cash from issue of common stock

$55

cash dividends paid

($20)

Cash flow from financing activities:

$35

Increase in cash

$96

Cash at the beginning of the year

$43

Cash at the end of the year

$139

Book value of land = 123 – 112 = $11

Less: sale proceeds = $28

Hence gain on sale of land = $28 - $11 = $17

Issue of common stock = $28 - $14 = $14

Add: amount reflected as paid up capital - $75 - $34 = $41

Total cash from issue of common stock = $14 + $41 = $55

Olson-Jones Industries Inc

Statement of Cash Flows

for the year ended December 31, 20Y2

Cash flow from operating activities:

net income

$91

Adjustments to reconcile net income to net cash flow from operating activities:

Depreciation

$8

Gain in sale of land

($17)

Changes in current operating assets and liabilities:

Increase in accounts receivable

($24)

Increase in inventory

($19)

Increase in accounts payable

$10

($42)

Cash flow from operating activities:

$49

Cash flow from investing activities:

Cash from sale of land

$28

purchase of equipment

($16)

Cash flow from investing activities:

$12

Cash flow from financing activities:

cash from issue of common stock

$55

cash dividends paid

($20)

Cash flow from financing activities:

$35

Increase in cash

$96

Cash at the beginning of the year

$43

Cash at the end of the year

$139

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