Question

Gain on sale of investments 80

Income before tax 1,270
Income tax expense 550
Net income 720
Cash dividends 260
Income retained in business $460
Additional information:
During the year, $70 of common stock was issued in exchange for plant assets.
No plant assets were sold in 2017.
Prepare a statement of cash flows using the indirect method.

Answer 1

See the explanation section

Step-by-step explanation:

Bonita Company

Statement of cash flow

For the year ended, December 31, 2017

(Indirect Method)

Net Income $720

Cash flow from operating activities

Depreciation $120

Gain on sale of investment (80)

Increase in Accounts receivable (460)

Decrease in Inventory 270

Increase in Accounts Payable 260

Decrease in accrued liabilities (60)

50

net cash provided by operating activities $770

Cash flows from investing activities

Purchase of plant asset (170)

Sale of Held-to-Maturity Investments 230

Net Cash Provided by Investing Activities 60

Cash Flows from Financing Activities

Payment of cash dividends (260)

Redemption of Bonds Payable (180)

Issuance of capital stock 190

Net cash used by financing activities (250)

Net increase in cash 580

Cash at the beginning period 1,180

Cash at the end of period 1,760