The following is selected information from Flip Company for the fiscal years end
ID: 2499311 • Letter: T
Question
The following is selected information from Flip Company for the fiscal years ended December 31, 2014: Flip Company had net income of $1,225,000. Accounts receivable decreased by $25,000. Accounts payable decreased by $40,000. Depreciation was $500,000. Purchases of plant assets were for $1,250,000 cash, and sold plant assets for $500,000 cash, which resulted in a $50,000 gain. Stock was issued in exchange for an outstanding note payable of $725,000. Dividends of $300,000 were paid to shareholders. Cash balance on Dec 31, 2013 was $250,000 and cash balance on Dec 31, 2014 was $860,000. Requirements: Prepare Flip Company's statement of cash flows for the year ended December 31, 2014 using the indirect method.
Explanation / Answer
Flip Company
Statement of Cash Flows
For the year ended 31st Dec 2014
Cash flows from operating activities
Net income
1225000
Adjustments for:
Add: Depreciation
$500,000
Less Gain on sale of Plant assets
-50,000
450,000
Add Decrease in Accounts receivables
25,000
Less Decrease in Accounts payables
-40,000
-15,000
Cash generated from operations
1,660,000
Cash flows from investing activities
Less Purchase of plant assets
-1,250,000
Add Proceeds from sale of plant assets
500,000
Net cash used in investing activities
-750,000
Cash flows from financing activities
Less Dividends paid
-300,000
Net cash used in financing activities
-300,000
Net increase in cash and cash equivalents
610,000
Cash and cash equivalents at Dec 31st 2013
250,000
Cash and cash equivalents at Dec 31st 2014
$860,000
Flip Company
Statement of Cash Flows
For the year ended 31st Dec 2014
Cash flows from operating activities
Net income
1225000
Adjustments for:
Add: Depreciation
$500,000
Less Gain on sale of Plant assets
-50,000
450,000
Add Decrease in Accounts receivables
25,000
Less Decrease in Accounts payables
-40,000
-15,000
Cash generated from operations
1,660,000
Cash flows from investing activities
Less Purchase of plant assets
-1,250,000
Add Proceeds from sale of plant assets
500,000
Net cash used in investing activities
-750,000
Cash flows from financing activities
Less Dividends paid
-300,000
Net cash used in financing activities
-300,000
Net increase in cash and cash equivalents
610,000
Cash and cash equivalents at Dec 31st 2013
250,000
Cash and cash equivalents at Dec 31st 2014
$860,000
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