Below is Knope\'s Waffles Inc\'s balance sheet for the prior two years: In 2015,

Question

Below is Knope's Waffles Inc's balance sheet for the prior two years: In 2015, Knope sold equipment with historical cost of $13,000 and net book value of $5,000. The sale price was $8,000 The Company also purchased new equipment. Knope took out a new loan of $100,000 during 2015 No common stock was repurchased in 2015. Finally, Knope paid a cash dividend to its investors of $50.0X. Required: Utilizing the balance sheets above and the additional information given, prepare an indirect cash flow statement for Knope for 2015

Explanation / Answer

cash flow from operating activity

net income (1058000 - 965000+50000) 143000

less : Depreciation (18000 ) add: provision of income tax (profit and loss) 76000

less: profit on sale of equipment (5000 -8000) ($3000)

add: cash dividned 50000

less: increase in accounts receivable (65000)

less: increase in inventory (45000)

add: increase in accounts payable 95000

less: decrease in accrued liability (25000)

less: income tax paid (70000)

net cash flow generated from operating activity 138000

Cash flow from investing activity

sale of equipmet 8000

purchase of equipment (62000)

net cash flow generated from investing activity (54000)

Cash flow from financing activity

proceed from loan 100000

cash dividend (50000)   

issue of common stock 6000

Payment of Note payable (170000)

net cash flow generated from Financing activity (114000)

net increase/ (decrease) in cash and cash equivalent (30000)

add : cash and cash equivalent in beginning $79000

cash and cash equivalent in ending $49000

Note:- Propery ,pant and equipement Account (cost)

   To balance b/d 1466000 by Assets disposal 13000

   To cash(b/f) 62000 by balance c/d 1515000

     1528000 1528000

   Accumulated depreciation Account

To Assets disposal 8000 by balance b/d 641000

  To balance c/d 765000 by profit and loss(b/f) 132000

773000 773000   

Assets Disposal Account

To Propery ,pant and equipement Account 13000 By sale 8000

   To profit and loss(profit on sale) 3000 By accumulated depreciation 8000

   16000 16000

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