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

Question

Statement of Cash Flows—Indirect Method The comparative balance sheet of Olson-Jones Industries Inc. for December 31, 20Y2 and 20Y1, is as follows: Dec. 31, 20Y2 Dec. 31, 20Y1 Assets Cash $145 $48 Accounts receivable (net) 83 60 Inventories 52 33 Land 118 133 Equipment 67 52 Accumulated depreciation-equipment (18) (9) Total Assets $447 $317 Liabilities and Stockholders' Equity Accounts payable (merchandise creditors) $56 $48 Dividends payable 9 - Common stock, $1 par 30 15 Paid-in capital: Excess of issue price over par—common stock 69 37 Retained earnings 283 217 Total liabilities and stockholders' equity $447 $317 The following additional information is taken from the records: Land was sold for $38. Equipment was acquired for cash. There were no disposals of equipment during the year. The common stock was issued for cash. There was a $96 credit to Retained Earnings for net income. There was a $30 debit to Retained Earnings for cash dividends declared a. Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments. Olson-Jones Industries Inc. Statement of Cash Flows For the Year Ended December 31, 20Y2 Cash flows from operating activities: Net income $ Adjustments to reconcile net income to net cash flow from operating activities: Depreciation Gain on sale of land Changes in current operating assets and liabilities: Increase in accounts receivable Increase in inventories Increase in accounts payable Net cash flow from operating activities $ Cash flows from (used for) investing activities: Cash from sale of land $ Cash used for purchase of equipment Net cash flow from investing activities Cash flows from (used for) financing activities: Cash from sale of common stock $ Cash used for dividends Net cash flow from financing activities Increase in cash $ Cash at the beginning of the year Cash at the end of the year $ b. Was Olson-Jones Industries Inc.’s net cash flow from operations more or less than net income?

Explanation / Answer

Olson-Jones Industries Inc. Statement of Cash Flows For the Year Ended December 31, 20Y2 Cash flows from operating activities: Net income 96 Adjustments to reconcile net income to net cash flow from operating activities: Depreciation 9 Gain on sale of land -23 Changes in current operating assets and liabilities: Increase in accounts receivable -23 Increase in inventories -19 Increase in accounts payable 8 Net cash flow from operating activities 48 Cash flows from (used for) investing activities: Cash from sale of land 38 Cash used for purchase of equipment -15 Net cash flow from investing activities 23 Cash flows from (used for) financing activities: Cash from sale of common stock 47 Cash used for dividends -21 Net cash flow from financing activities 26 Increase in cash 97 Cash at the beginning of the year 48 Cash at the end of the year 145 Olson-Jones Industries Inc.’s net cash flow from operations was less than net income

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