method 12-4A. Statement of Cash Flows (Indirect Method) Use the following inform

Question

method 12-4A. Statement of Cash Flows (Indirect Method) Use the following information regarding the Lund LO2, 3 0 Corporation to (a) prepare a statement of cash flows using the indirect method and (b) compute Lund's operating-cash-flow-to-current-liabilities ratio. MBC 11,000 4,000 Accounts receivable increase . . . . 7,000 22,000 Cash paid as dividends. :. 31,000 90,000 Cash paid to retire bonds payable at par.. . . Cash received from issuance of common stock.............. Cash received from sale of equipment Depreciation expense.. .. 29,000 ...5,000 ...13,000 ....78,000 ..3,000 Inventory decrease..

Explanation / Answer

Statement of Cash Flows AS ON DECEMBER 31 Amount in $ Amount in $ Net income $       78,000.00 Cash flows from operating activities Adjustments for: Depreciation $       29,000.00 Amortization Expenses $          7,000.00 Gain on sale of Equipment $        -5,000.00 $       31,000.00 (Increase) / Decrease in Account receivables $        -4,000.00 Inventory Decrease / (Increase) $       13,000.00 Prepaid expenses increase $        -3,000.00 Accrued Liabilities Decrease $        -3,000.00 Interest Payable Accounts payable Increase / ( Decrese) $       11,000.00 $       14,000.00 Net cash from operating activities $    1,23,000.00 Cash flows from investing activities Sale of Investment Purchase of Land $      -90,000.00 Sale of Building Purchase of Equipment Net cash used in investing activities $      -90,000.00 Cash flows from Financing activities Sale of Equipment $       17,000.00 Retirement of Bonds $      -60,000.00 Dividend Paid $      -31,000.00 Purcashe of Commons stock Issue of Common Stock $       35,000.00 Net cash used in financing activities $      -39,000.00 Net increase in cash and cash equivalents $        -6,000.00 Add :Cash and cash equivalents at beginning of period $       22,000.00 Cash and cash equivalents at end of period $       16,000.00 Answer = B) Operating Cash Flow to Current Liability Ratio = Cash Flow from operating Activities / Average Current Laibilities Operating Cash Flow to Current Liability Ratio = Cash Flow from operating Activities= $    1,23,000.00 Divide By "/" Average Current Liabilities $    1,20,000.00 Operating Cash Flow to Current Liability Ratio =                      1.03

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