The Food Company prepared thre following comparative balance sheets at December

Question

The Food Company prepared thre following comparative balance sheets at December 31, 2014 and 2013.

12/31/13

Additional Information for the year ended 12/31/14:

* Sold available for sale securities costing $69,500 for $74,000

*Equipment costing $20,000, with a book value of $5,000, was sold for $6,000

*Issued 6% bonds payable at par

*Repaid a portion of a long term bank loan

*Purchased new equipment for $145,000 cash

*Paid cash divedends of $20,000

*Net Income for 2014 was $50,000

*Food Company prepares its cash flows statement under the indirect method

A)What is the net cash flows from operating activities on the cash flows statement for 2014?

B)What is the net cash flows from investing activities on the cash flow statement for 2014?

C)What is the net cash flows from financing activities on the cash flow statement for 2014?

12/31/14

12/31/13

Cash $77,375 $(22,955) Marketable Securities 15,500 85,000 Accounts Recievable 80,000 68,250 Inventory 165,000 145,000 Prepaid Insurance 1,500 2,000 Land, Buidings, and Equipment 1,250,000 1,250,000 Accumulated Depreciation (610,000) (572,000) Total Assets $979,375 $830,295 Accounts Payable $76,340 $102,760 Salaries Payable 20,000 24,500 Notes Payable 25,000 75,000 Bonds Payable 200,000 0 Common Stock 300,000 300,000 Retained Earnings 358,035 328,035 Total Liabilities and Shareholders Equity $979,375 $830,295

Explanation / Answer

Answer:

Note:

Cash Flow Statement Cash Flow from Operating Activities ($) Net Income          50,000 Add: Depreciation (Note)          53,000 Less: Profit on Sale Equipment          (1,000) less: Profit on sale of marketable securities          (4,500) Adjustment for Current Assets and current Liabilities Less: Increase in value of Accounts receivable       (11,750) Add: Decrease in value of prepaid expense                500 Less: Increase in inventory       (20,000) Less: Decrease in Accounts payable       (26,420) Less: Decrease in Salaries payable          (4,500) Net cash generated from Operating Activities(A)          35,330 Cash From Investing Activities Sale of Marketable Security          74,000 Sale of Equipment            6,000 Purchase of new equipment     (145,000) Net cash generated from Investing Activities(B)       (65,000) Cash From Financing Activities Proceeds from issue of Bond       200,000 Payment of Long term bank loan(75000-25000)       (50,000) Dividend paid       (20,000) Net cash generated from financing Activities ( C )       130,000 Net cash from opetation (A+B+C)       100,330 Add:Cash and cash equivalent at the beginning of the year       (22,955) Cash and cash equivalent at the end of the year          77,375

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