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The comparative balance sheet of Mavenir Technologies Inc. for December 31, 2010 and 2009, is shown as follows:



The following additional information was taken from the records:

The investments were sold for $140,000 cash.
Equipment and land were acquired for cash.
There were no disposals of equipment during the year.
The common stock was issued for cash.
There was a $75,520 credit to Retained Earnings for net income.
There was a $48,000 debit to Retained Earnings for cash dividends declared.
Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. If needed, use the minus sign to indicate cash outflows.


MAVENIR TECHNOLOGIES INC.
Statement of Cash Flows
For the Year Ended December 31, 2010
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash
flow from operating activities:
SelectDecrease in accounts receivableIncrease in accounts receivableDepreciationLoss on sale of investmentsItem 2
SelectLoss on sale of investmentsIncrease in accounts payableGain on sale of investmentsDecrease in inventoriesItem 4
Changes in current operating assets and liabilities:
SelectDecrease in inventoriesIncrease in accounts receivableDepreciationDecrease in accounts receivableItem 6
SelectDecrease in accounts receivableDecrease in inventoriesDecrease in accounts payableIncrease in inventoriesItem 8
SelectIncrease in accounts payableDecrease in inventoriesDecrease in accounts payableIncrease in accrued expensesItem 10
SelectDepreciationIncrease in accrued expensesDecrease in accounts payableDecrease in accrued expenses payableItem 12
Net cash flow from operating activities

Cash flows from investing activities:
SelectGain on sale of investmentsCash received from sale of investmentsDepreciationPlus cash paid for purchase of equipmentItem 15
SelectLess cash paid for purchase of landGain on sale of investmentsDepreciationPlus cash paid for purchase of landItem 17
SelectIncrease in inventoriesDecrease in accounts receivablePlus cash paid for purchase of equipmentLess cash paid for purchase of equipmentItem 19
Net cash flow used for investing activities

Cash flows from financing activities:
SelectDepreciationCash received from sale of investmentsCash received from sale of common stockDecrease in accounts payableItem 22
SelectLess cash paid for dividendsPlus cash paid for dividendsDecrease in inventoriesIncrease in accounts receivableItem 24
Net cash flow provided by financing activities
SelectIncreaseDecreaseItem 27 in cash
Cash at beginning of the year
Cash at end of the year

Explanation / Answer

Prob. 16–1A

MAVENIR TECHNOLOGIES INC.

Statement of Cash Flows
For the Year Ended December 31, 2010

Cash flows from operating activities:
Net income ....................................................             $ 75,520
Adjustments to reconcile net income to net
cash flow from operating activities:
Depreciation.............................................                         9,200
Gain on sale of investments...................                                (20,000)
Changes in current operating assets and
liabilities:
Increase in accounts receivable .......                                          (9,440)
Increase in inventories ......................                                   (12,320)
Increase in accounts payable ...........                                       11,760
Decrease in accrued expenses
payable .............................................                               (5,200)
Net cash flow from operating activities ......                                                   $ 49,520
Cash flows from investing activities:
Cash received from sale of investments ....                               $140,000
Less: Cash paid for purchase of land.........    $164,000
Cash paid for purchase of
equipment......................................         76,000               240,000
Net cash flow used for investing
activities......................................................                                   (100,000)
Cash flows from financing activities:
Cash received from sale of
common stock............................................                    $116,000
Less cash paid for dividends.......................                             45,600*
Net cash flow provided by financing
activities......................................................                                       70,400
Increase in cash .................................................                                $ 19,920
Cash at the beginning of the year.....................                                          292,960
Cash at the end of the year ...............................                                      312,880
*$48,000 + $9,600 – $12,000 = $45,600

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