Required: Purchased equipment for $310,000 in cash. Declared and paid $230,000 o

Question

Required:

Purchased equipment for $310,000 in cash.

Declared and paid $230,000 of cash dividends.

Create statement of cash flow (indirect method)

2001 2000 Current Assets Cash 22000 42000 Accounts receivable 240200 73000 Inventory 143000 145000 Total current assets 405200 260000 Long term assets Equipment 4174000 227400 Accum. depreciation—Equipment -142400 -17400 Total long term assets 275000 210000 Total assets 680200 470000 Current Liabilities Accounts payable 90000 50000 Salaries payable 5000 10000 Total current liabilities 95000 60000 Long term Liabilities Notes payable 160000 80000 bonds payable 0 20000 total liabilities+current 255000 160000 Equity Common stock 335200 250000 Retained earnings 90000 60000 Total equity 425200 310000 Total liabilities and Equity 680200 470000 Sales 707000 gain on sale of equipment 10000 717000 Cost of goods sold 156000 561000 Operating expense depreciation expense 200000 salary expense 56000 income tax expense 45000 301000 NET 260,000

Required:

Purchased equipment for $310,000 in cash.

The Common Stock Account Change due to selling additional stock for cash. Sold equipmemt that had a cost of $120,000 for a $10,000 gain

Declared and paid $230,000 of cash dividends.

Create statement of cash flow (indirect method)

Explanation / Answer

CASH FLOW FROM OPERATING ACTIVITIES $ Net Income 2,60,000 Add: Depreciation 2,00,000 Less: Gain on sale of equipment 10,000 Add: Increase in Current Liabilities       Accounts Payable 40,000 Less: Increase in Current Assets      Accounts receivables (Net) -1,67,200 Add: Decrease in Current Asset      Inventory 2,000 Less: Decrease in Current liabilities      Salaries Payable -5,000 NET CASH FLOW FROM OPERATING ACTIVITIES (1) 3,39,800 CASH FLOW FROM INVESTING ACTIVITIES $ Acquisition of Equipment -3,10,000 Sale of equipment 1,30,000 NET CASH FLOW FROM INVESTING ACTIVITIES (2) -1,80,000 CASH FLOW FROM FINANCING ACTIVITIES $ Dividend Paid -2,30,000 Increase in Common Stock 85,200 Decrease in Bonds payable -20,000 Increase in Notes payable 80,000 NET CASH FLOW FROM FINANCING ACTIVITIES (3) -84,800 NET CASH INFLOW/(OUTFLOW) DURING YEAR (1) + (2) + (3) 75,000

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