The following balances are avilable for the Chrisman Company 2010 2009 Cash 8,00

Question

The following balances are avilable for the Chrisman Company
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
Plants and Equipment 400,00 300,000
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
Commons stock 200,000 150,000
Retained earning 137,000 111,000
Totals 462,000 401,000


Bonds were retired durning 2010 at face vaule, 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
Prepare a statement of cash flows for 2010 using the indirect method in the Operating Activities section.

Did Chrisman generate sufficient cash flow from operations to pay for its investing activites .

How did it generate cash other than from operaions? Explain answer.

Explanation / Answer

2. Yes, Chrisman can genarate sufficient cash flows from operations to pay for its investing activities. 3. Chrisman can generate cash other than from operations, from financing activities can generate cash.Cash can provide by financing activities like issuance of common stock. Statement of cash flows of Chrisman company For the year ended December 31, 2010 (Indirect method) Cash flows from operating activities Net income $26,000 Adjustments to reconcile net income to net cash used by operating activities: Depreciation expenses 35,000 Increase in accounts receivable -5,000 Decrease in inventory 10,000 Increase in pre-paid rent expenses -3,000 Increase in accounts payable 2,000 Decrease in income tax liability -2,000 Increase in notes payable 10,000 Decrease in bonds payable -25,000 22,000 Net cash used by operating activities 48,000

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