3.) Prepare a Statement of Cash Flows using the indirect method. The balance she

Question

3.) Prepare a Statement of Cash Flows using the indirect method.

The balance sheets for Kinder Company showed the following information. Additional information concerning transactions and events during 2018 are presented below.

Kinder Company

Balance Sheet

                                                                                                                          December 31          

                                                                                                                   2018                    2017   

         Cash                                                                                               $ 35,900 $ 10,200

         Accounts receivable (net)                                                                      38,300                 20,300

         Inventory                                                                                              35,000                 42,000

         Long-term investments                                                                                  0                 15,000

         Property, plant & equipment                                                                236,500                150,000

         Accumulated depreciation                                                                    (37,700)               (25,000)

                                                                                                                 $308,000              $212,500

         Accounts payable                                                                             $ 17,000              $ 26,500

         Accrued liabilities                                                                                 21,000                 17,000

         Long-term notes payable                                                                      70,000                 50,000

         Common stock                                                                                   130,000                 90,000

         Retained earnings                                                                                 70,000                 29,000

                                                                                                                 $308,000              $212,500

Additional data:

1.   Net income for the year 2018, $71,000.

2.   Depreciation on plant assets for the year, $12,700.

3.   Sold the long-term investments for $28,000 (assume gain or loss is ordinary).

4.   Paid dividends of $30,000.

5.   Purchased machinery costing $21,500, paid cash.

6.   Purchased machinery and gave a $60,000 long-term note payable.

7.   Paid a $40,000 long-term note payable by issuing common stock.

Explanation / Answer

Statement of Cash Flow Particulars Amount Total Amount Income                  71,000.00 Gain on sale of investment = 28000 - 15000               (13,000.00) Depreciation                  12,700.00 Increase in AR               (18,000.00) Decrease in inventory                    7,000.00 Decrease in AP                  (9,500.00) Increase in Accrued liabilities                    4,000.00 Cash flow from operating activities                  54,200.00 Cash flow from Investing activities Sale of investment                  28,000.00 Purchase of Machinery               (26,500.00) Cash flow from Investing activities                    1,500.00 Cash flow from Financing activities Dividends Paid               (30,000.00) Cash flow from Financing activities               (30,000.00) net change in cash and cash equivalents                  25,700.00 Opening cash and cash equivalents                  10,200.00 Closing cash and cash equivalents                  35,900.00

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