The differences in Bravo Inc.\'s balance sheet accounts at December 31, year 2 a
ID: 2479336 • Letter: T
Question
The differences in Bravo Inc.'s balance sheet accounts at December 31, year 2 and year 1, are presented below.
Assets Increase (Decrease)
Cash and cash equivalents $120,000
Available-for-sale securities 300,000
Accounts receivable, net 0
Inventory 80,000
Long-term investments (100,000)
Plant assets 700,000
Accumulated depreciation 0
Total $1,100,000
Liabilities and Stockholders' Equity Increase (Decrease)
Accounts payable and accrued liabilities $(5,000)
Dividends payable 160,000
Short-term bank debt 325,000
Long-term debt 110,000
Common stock, $10 par 100,000
Additional paid-in capital 120,000
Retained earnings 290,000
Total $1,100,000
The following additional information relates to year 2:
> Net income was $790,000.
> Cash dividends of $500,000 were declared.
> Building costing $600,000 and having a carrying amount of $350,000 was sold for $350,000.
> Equipment costing $110,000 was acquired through issuance of long-term debt.
> A long-term investment was sold for $135,000. There were no other transactions affecting long-term investments.
> 10,000 shares of common stock were issued for $22 a share.
Prepare Bravo's year 2 Cash Flows from Operating Activities (section), using the indirect method:
Explanation / Answer
Bravo's Cash Flows from Operating Activities Particulars Amount Amount Net income $7,90,000 Adjustements to Net Income Increase in Inventory $80,000 Decrease in Accounts Payable -$5,000 $75,000 Cash Flow From Operating Activities $8,65,000
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