The following is selected information from Rayco Company for the fiscal years en
ID: 2483406 • Letter: T
Question
The following is selected information from Rayco Company for the fiscal years ended December 31, 2014: Rayco Company had net income of $1,225,000. Depreciation was $500,000, purchases of plant assets were $1,250,000, and disposals of plant assets for $500,000 resulted in a $50,000 gain. Stock was issued in exchange for an outstanding note payable of $725,000. Accounts receivable decreased by $25,000. Accounts payable decreased by $40,000. Dividends of $300,000 were paid to shareholders. Rayco Company had interest expense of $50,000. Cash balance on January 1, 2014 was $250,000.
Requirements: Prepare Rayco Company's statement of cash flows for the year ended December 31, 2014 using the indirect method.
Explanation / Answer
Statement of Cash Flow Particulars Amount Total Amount Income 1,225,000.00 Gain on sale of plant assets (50,000.00) Depreciation 500,000.00 Decrease in AR 25,000.00 Decrease in AP (40,000.00) Cash flow from operating activities 1,660,000.00 Cash flow from Investing activities Disposal of Plant assets 500,000.00 Purchase of Plant assets (1,250,000.00) Cash flow from Investing activities (750,000.00) Cash flow from Financing activities Dividends Paid (300,000.00) Cash flow from Financing activities (300,000.00) Opening cash and cash equivalents 250,000.00 Closing cash and cash equivalents (bal fig) 860,000.00
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