Problem 2 Presented below is a condensed version of the comparative balance shee

Question

Problem 2 Presented below is a condensed version of the comparative balance sheets for Smith Brothers Corporation for the last two years at December 31 Cash Accounts receivable Investments Equipment Less: Accumulated Depreciation Current Liabilities Capital Stock Retained Earnings Smith Brother Corporation Balance Sheets (in thousands) 2004 2005 354 156 360 370 104 148 596 480 (212) (178) 268 302 320 320 614 354 Additional information for transactions took place in 2005: a machine was sold at $100,000 (with an acquisition cost of $220,000 and accumulated depreciation of $200,000); net income for 200:5 was $320,000 and depreciation expenses for the year amount to $166,000. Instruction Prepare a statement of cash flows for period ended on December 31, 2005

Explanation / Answer

Statement of Cash Flow Particulars Amount Total Amount Income                      320.00 Gain on sale of Machine = 100 - (220-200)                      (80.00) Depreciation                      166.00 Increase in AR                      (10.00) Increase in CL                        34.00 Cash flow from operating activities                   430.00 Cash flow from Investing activities Purchase of invt                      (44.00) Sale of machine                      100.00 Purchase of machine =596-220-480                   (104.00) Cash flow from Investing activities                   (48.00) Cash flow from Financing activities Dividends Paid = 614-354 +320                   (580.00) Cash flow from Financing activities                 (580.00) Opening cash and cash equivalents                   354.00 Closing cash and cash equivalents                   156.00

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