Statement of Cash Flows—Indirect Method The comparative balance sheet of Tru-Bui

Question

Statement of Cash Flows—Indirect Method

The comparative balance sheet of Tru-Built Construction Inc. for December 31, 2014 and 2013, is as follows:

The following additional information is taken from the records:

Land was sold for $28.

Equipment was acquired for cash.

There were no disposals of equipment during the year.

The common stock was issued for cash.

There was a $77 credit to Retained Earnings for net income.

There was a $24 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 and for any adjustments, if required.

Dec. 31, 2014 Dec. 31, 2013 Assets Cash $117 $38 Accounts receivable (net) 66 47 Inventories 42 26 Land 95 106 Equipment 53 41 Accumulated depreciation-equipment (14) (7) Total $359 $251 Liabilities and Stockholders' Equity Accounts payable (merchandise creditors) $45 $38 Dividends payable 7 - Common stock, $10 par 24 12 Paid-in capital in excess of par-common stock 58 29 Retained earnings 225 172 Total $359 $251

Explanation / Answer

Statement of Cash Flows-Indirect Method

Tru-Built Construction Inc. for December 31, 2014 and 2013

Cash flows from operating activities:

Net income 77
Items to reconcile net income to cash flows from operating activities -
Depreciation expense 7
Gain on sale of land (17)
Increase in accounts receivable (19)
Increase in inventories (16)
Increase in accounts payable 7
Increase in dividends payable 7
Net cash flows from operating activities 46

Cash flows from investing activities:
Cash paid to acquire equipment (12)
Cash received from sale of land 28
Net cash flows from investing activities 16

Cash flows from financing activities:
Cash received from issuance of common stock 39
Cash paid for dividends (24)
Net cash flows from financing activities 15

Net change in cash (46+16+15) = 77

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