Question

Bonds were retired during 2016 at face value, plant and equipment were acquired for cash, and common stock was issued for cash. Depreciation expense for the year was $35,000. Net income was reported at $26,000.

(1) Prepare a statement of cash flows for 2016 using the indirect method in the Operating Activities section.
(2) Did Chrisman generate sufficient cash from operations to pay for its investing activities

Answer 1

Using Indirect Method

1. Cashflow from operating activities $

Net income 26,000

Add: Depreciation 35,000

Cashflow from operating activities 61,000

2. Chrisman has generated sufficient cashflow from operating activities to pay for its investing activities.

Step-by-step explanation:

Cashflow from operating activities equals net income plus adjustment for items not involving movement of cash such as depreciation.