Burns Corporation\'s net income last year was $91,000. Changes in the company\'s

Question

Burns Corporation's net income last year was $91,000. Changes in the company's balance sheet accounts for the year appear below: Increases (Decreases) Asset and Contra-Asset Accounts Cash Accounts receivable Inventory Prepaid expenses Long-term investments Property, plant and equipment Accumulated depreciation $ 42,800 $ 29,000 $ (36,000) $ 3,200 $ 47,000 $ 77,000 $ 53,000 Liability and Equity Accounts Accounts payable Accrued liabilities Income taxes payable Bonds payable Common stock Retained earnings $ (36,000) $26,000 $ 56,000 $ (67,000) $57,000 $ 74,000 The company did not dispose of any property, plant, and equipment, sell any long-term investments, issue any bonds payable, or repurchase any of its own common stock during the year. The company declared and paid a cash dividend of $17,000 Required a. Prepare the operating activities section of the company's statement of cash flows for the year. (Use the indirect method.) (Amounts to be deducted should be indicated with a minus sign.)

Explanation / Answer

STATEMENT OF CASH FLOWS a) Cash flow from operating activities: Net income 91000 Adjustments to reconcile net income with net cash from operating activities: Depreciation 53000 Increase in accounts receivable -29000 Decrease in inventory 36000 Increase in prepaid expenses -3200 Decrease in accounts payable -36000 Increase in accrued liabilities 26000 Increase in income taxes payable 56000 102800 Net cash from operating activities 193800 b) Cash flow from investing activities: Purchase of Property, Plant and equipment -77000 Purchase of long term investments -47000 Net cash from investing activities -124000 c) Cash flow financing activities: Redemption of bonds -67000 Issue of common stock 57000 Dividends paid -17000 Net cash from financing activities -27000 Decrease in cash and cash equivalents 42800

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