Statement of Cash Flows Using a Work Sheet—Indirect Method (Appendix) Peoria Cor

Question

Statement of Cash Flows Using a Work Sheet—Indirect Method (Appendix)

Peoria Corp. just completed another successful year, as indicated by the following income statement:

Presented here are comparative balance sheets:

Other information is as follows:

Dividends of $63,942 were declared and paid during the year.

Operating expenses include $49,820 of depreciation.

Land and plant and equipment were acquired for cash, and additional stock was issued for cash. Cash also was received from additional bank loans.

The president has asked you some questions about the year's results. She is very impressed with the profit margin of 18.15% (net income divided by sales revenue). She is bothered, however, by the decline in the company's cash balance during the year. One of the conditions of the existing bank loan is that the company maintain a minimum cash balance of $49,820.

Required:

1. Using the format in the chapter's appendix, prepare a statement of cash flows work sheet. If an amount box does not require an entry, leave it blank.

2. Prepare a statement of cash flows for 2014 using the indirect method in the Operating Activities section. Use the minus sign to indicate cash payments, cash outflows, or decreases in cash.

Peoria Corp.

Statement of Cash Flows

For the Year Ended December 31, 2014

Cash Flows from Operating Activities

$  

Adjustments to reconcile net income to net cash provided by operating activities:

$  

Cash Flows from Investing Activities

$  

$  

Cash Flows from Financing Activities

$  

$  

$  

Cash balance, December 31, 2013

Cash balance, December 31, 2014

$  

Explanation / Answer

31-Dec 2014 2013 Change Cash 53,070 89,320 -36,250 Accounts receivable 180,660 129,080 51,580 Inventory 229,040 200,310 28,730 Prepayments 15,980 25,460 -9,480    Total current assets 478,750 444,170 34,580 Land 748,810 600,750 148,060 Plant and equipment 698,440 501,480 196,960 Accumulated depreciation -248,940 -199,120 -49,820    Total long-term assets $1,198,310 903,110 295,200    Total assets $1,677,060 $1,347,280 329,780 Accounts payable 131,790 146,480 -14,690 Other accrued liabilities 67,240 63,600 3,640 Income taxes payable 90,470 110,370 -19,900    Total current liabilities 289,500 320,450 -30,950 Long-term bank loan payable 348,150 300,890 47,260 Common stock 551,000 400,370 150,630 Retained earnings 488,410 325,570 162,840   Total Stockholders' Equity $1,039,410 725,940 313,470   Total liabilities and Stockholders' Equity $1,677,060 $1,347,280 329,780 Cash flows from operating activities Net income 226,782 Adjustments for: Depreciation and amortization 49,820 Increase in accounts receivables -51,580 increase in inventories -28,730 Decrease in Prepayment 9,480 Decrease in accounts payables -14,690 increase Other accrued liabilities 3,640 Decrease Income taxes payable -19,900 -51,960 Cash generated from operations 174,822 Cash flows from investing activities Purchase of land -148,060 Payment for purchase of plant and equipment -196,960 Net cash used in investing activities -345,020 Cash flows from financing activities Proceeds from issue of common stock 150,630 Dividends paid -63,942 Long term loan payable 47,260 Net cash used in financing activities 133,948 Net increase in cash and cash equivalents -36,250 Cash and cash equivalents at beginning of period 89,320 Cash and cash equivalents at end of period $53,070

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