Calculate net cash provided by operating activities using the indirect method. H

Question

Calculate net cash provided by operating activities using the indirect method.

Harlan Mining Co. has recently decided to go public and has hired you as an independent CPA.One statement that the enterprise is anxious to have prepared is a statement of cash flows. Financial statements of Harlan Mining Co. for 2019 and 2018 are provided below BALANCE SHEETS 12/31/19 Difference Cash Accounts receivable Invento Property, plant and equipment Less a?umulated depreciation 2/31/18 $192,000 216,000 480,000 $408,000 360,000 384,000 144,000 96,000 $608,000 320,000 $960,000 304,000 288,000 656,000 $1,544,000 1,440,000 Difference Accounts payable Income taxes payable Bonds payable Common stock Retained earnings 176,000 96,000 $80,000 40,000 240,000 352,000 360,000 216,000 336,000 $1,440,000 392,000 600,000 216,000 240,000 $1,544,000 96,000 104,000 INCOME STATEMENT For the Year Ended December 31,2019 Sales revenue Cost of sales Gross profit Selling expenses Administrative ex Income from operations Other losses Income before taxes Income taxes Net income The following additional data were provided: $8,400,000 7,152,000 1,248,000 $600,000 192,000 792,000 456,000 72,000 384,000 96,000 $288,000 1 Dividends for the year 2019 were $192,000 2 During the year, equipment was sold for S240,000. This equipment cost S352,000 originally and had a book value of S288,000 at the time of sale. 3 Depreciation expense, $80,000, is in the selling expense category Questions relate to a statement of cash flows (indirect method) for the year ended December 31st, 2019, for Harlan Mining Company

Explanation / Answer

Harlan Mining Co. Statement of Cash Flows For the Year Ended December 31, 2019 Cash Flows from Operating Activities: Net income 288000 Adjustments to reconcile net income to net cash provided by operations: Depreciation expense 80000 Loss on sale of equipment ($240000 - $288000) 48000 Increase in Accounts receivable -144000 Decrease in Inventory 96000 Increase in Accounts payable 80000 Decrease in Income taxes payable -40000 120000 Net cash provided by operating activities 408000 Cash Flows from Investing Activities: Sale proceeds from equipment 240000 Net cash provided by investing activities 240000 Cash Flows from Financing Activities: Repayment of bonds payable -240000 Payment of cash dividends -192000 Net cash used by financing activities -432000 Net increase (decrease) in cash 216000 Cash balance, December 31, 2018 192000 Cash balance, December 31, 2019 408000

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