Below are the comparative balance sheets for DUMB Y Company as of December 31. A

Question

Below are the comparative balance sheets for DUMB Y Company as of December 31. Additional information: 1.Operating expenses include depreciation expense of $48,000. 2.Land was sold for cash at book value. 3.Cash dividends of $12,000 were paid. 4.Net income for 2014 was $46,000. 5.Equipment was purchased for $88,000 cash. In addition, equipment costing $34,000 with a book value of $6,000 was sold for $9,000 cash. 6.Bonds were converted at face value by issuing 50,000 shares of $1 par value common stock. Prepare a statement of cash flows as of December 31st 2014 for DUMBY. 10. You are provided with the following transactions that took place during the year. For each transaction listed above, indicate whether it will increase (I), decrease (D), or have no effect (NE) on the ratios.

Explanation / Answer

Answer:

Dumby company Statement of cash flows Cash Flow from operating activities: Net income 46000 Adjustment: Dep exp 48000 gain on sale of equipment -3000 Increase in accounts receivable -6000 Decrease in inventory 3000 Increase in prepaid expenses -4000 Decrease in accounta payable -9000 Cash Provided by operating activities 75000 Cash Flow From investing activities: Sale of land 34000 Purchase of equipment -88000 Sale of equipment 9000 Cash used in investing activities -45000 Cash flow from financing activities: Dividend paid -12000 Cash used in financing activties -12000 Cash Flow from all activities 18000 Add: opening balance of cash 78000 Closing balance of cash 96000

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