Statement of Cash Flows—Indirect Method Peoria Corp. just completed another succ

Question

Statement of Cash Flows—Indirect Method

Peoria Corp. just completed another successful year, as indicated by the following income statement:

Presented here are comparative balance sheets:

Other information is as follows:

Dividends of $57,474 were declared and paid during the year.

Operating expenses include $51,360 of depreciation.

Land and plant and equipment were acquired for cash, and additional stock was issued for cash. Cash also was received from additional bank loans.

The president has asked you some questions about the year's results. She is very impressed with the profit margin of 18.01% (net income divided by sales revenue). She is bothered, however, by the decline in the company's cash balance during the year. One of the conditions of the existing bank loan is that the company maintain a minimum cash balance of $51,360.

Required:

Prepare a statement of cash flows for 2014 using the indirect method in the Operating Activities section. Use the minus sign to indicate cash payments, cash outflows, or decreases in cash.

Peoria Corp.

Statement of Cash Flows

For the Year Ended December 31, 2014

Cash Flows from Operating Activities

  

$  

Adjustments to reconcile net income to net cash provided by operating activities:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

$  

Cash Flows from Investing Activities

  

$  

  

  

  

$  

Cash Flows from Financing Activities

  

$  

  

  

  

  

  

$  

  

$  

Cash balance, December 31, 2013

  

Cash balance, December 31, 2014

$  

For the Year Ended
December 31, 2014

Explanation / Answer

Indirect method

Net cash flow from investing activities :

For bank loan he meet the expectations of minimum balance.

Net income $224,994 Add: Depreciation expense $51,360        Increase in other accrued liabilities     4,070        Decrease in prepayments     8,640 Less: Increase in accounts receivable ($49,580)         Increase in inventory ($30,850)          Decrease in accounts payable ($19,030)         Decrease in income tax payable ($21,860) $(57,250) Net cash flow from operating activities $167,744

Net cash flow from investing activities :

Land purchase ($148,930) Plant & Equipment ($198,970) ($347,900) Net cash flow from financing activities Common stock issued $152,040 Bank loan    50,070 dividends paid (57,474) $144,636 Net cash flow ($35,520) Cash at the beginning $89,360 Cash at the end $53,840

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