Statement of Cash Flows—Indirect Method The comparative balance sheet of Amelia

Question

Statement of Cash Flows—Indirect Method

The comparative balance sheet of Amelia Enterprises, Inc. at December 31, 2014 and 2013, is as follows:

Additional data obtained from the income statement and from an examination of the accounts in the ledger for 2014 are as follows:

Net income, $117,580.

Depreciation reported on the income statement, $40,460.

Equipment was purchased at a cost of $77,960, and fully depreciated equipment costing $21,990 was discarded, with no salvage realized.

The mortgage note payable was not due until 2016, but the terms permitted earlier payment without penalty.

7,000 shares of common stock were issued at $20 for cash.

Cash dividends declared and paid, $71,650.

Required:

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.

Amelia Enterprises, Inc.

Statement of Cash Flows

For the Year Ended December 31, 2014

Cash flows from operating activities:

  

$  

Adjustments to reconcile net income to net cash flow from operating activities:

  

  

Changes in current operating assets and liabilities:

  

  

  

  

  

  

  

  

Net cash flow from operating activities

$  

Cash flows from investing activities:

  

$  

Net cash flow used for investing activities

  

Cash flows from financing activities:

  

$  

  

$  

  

  

  

Net cash flow used in financing activities

  

  

$  

Cash at beginning of the year

  

Cash at end of the year

$  

Dec. 31, 2014 Dec. 31, 2013 Assets Cash $71,780 $88,510 Accounts receivable (net) 110,290 119,320 Merchandise inventory 157,560 147,900 Prepaid expenses 6,420 4,480 Equipment 320,950 264,980 Accumulated depreciation-equipment (83,450) (64,980) Total $583,550 $560,210 Liabilities and Stockholders' Equity Accounts payable (merchandise creditors) $122,550 $117,080 Mortgage note payable 0 168,060 Common stock, $1 par 19,000 12,000 Paid-in capital in excess of par-common stock 291,000 158,000 Retained earnings 151,000 105,070 Total $583,550 $560,210

Explanation / Answer

Amelia Enterprises, Inc. Cash Flow Statement (Indirect Method) For the year ended December 31, 2014 Cash flows from operating activities Net Income $   1,17,580 Adjustments for: Depreciation and Amortaization $      40,460 $      40,460 Decrease in Trade Receiveble $         9,030 Increase in Inventory $       -9,660 Increase in Prepaid Expenses $       -1,940 Increase in Accounts Payable $         5,470 Decrease in Mortgage Note Payable $ -1,68,060 $ -1,65,160 Cash Generated from Operations $       -7,120 Cash flows from investing activities Purchase of property, plant, and equipment $     -77,960 Net cash used in investing activities $     -77,960 Cash flows from financing activities Proceeds from issue of common stock $   1,40,000 Dividends Paid $     -71,650 Net cash used in financing activities $      68,350 Net increase in cash and cash equivalents $     -16,730 Cash and cash equivalents at beginning of period $      88,510 Cash and cash equivalents at end of period $      71,780

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