Question

A comparative balance sheet for Culver Corporation is presented as follows.

December 31
2020 2019
Assets
Cash 72740 22000
Accounts receivable 83220 67480
Inventory 181220 190480
Land 72220 111480
72,740 83,220 181,220 72,220 $ 22,000 67,480 190,480 111,480
Equipment 261,220 201,480
Accumulated Depreciation- (70,220) (43,480)
Equipment
Total $600,400 $549,440
Liabilities and Stockholders' Equity
Accounts payable 35,220 $48,480
Bonds payable 150,000 200,000
Common stock ($1 par) 214,000 164000
Retained earnings 201,180 136,960
Total Additional information:
1. Net income for 2020 was $127,440. No gains or losses were recorded in 2020.
2. Cash dividends of $63,220 were declared and paid.
3. Bonds payable amounting to $50,000 were retired through issuance of common stock.
Prepare a statement of cash flows for 2020 for Culver Corporation. (Show amounts that decrease cash flow wit sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1

Increase in cash = $50,740

Step-by-step explanation:

The statement of cash flows for 2020 can be prepared as follows:

Culver Corporation

Statement of Cash Flows

For December 31, 2020

Particulars $ $

Net income 127,440

Adjustment to reconcile net income:

Depreciation expenses (w.1) 26,740

(Increase) decrease in current assets:

Increase in accounts receivable (w.2) (15,740)

Decrease in inventory (w.3) 9,260

Increase (decrease) in current liabilities:

Decrease in accounts payable (w.4) (13,260)

Net cash from operating activities 134,440

Cash Flow from Investing Activities

Sales of land (w.5) 39,260

Purchase of equipment (w.6) (59,740)

Net cash from investing activities 20,480

Cash Flow from Financing Activities

Cash dividends paid (63,220)

Net cash from financing activities 63,220

Increase / (Decrease) in cash 50,740

Beginning cash balance 22,000

Ending cash balance 72,740

Workings:

w.1: Depreciation expenses = Accumulated Depreciation in 2020 - Accumulated Depreciation in 2019 = $70,220 - $43,480 = $26,740

w.2: Increase in accounts receivable = Accounts receivable in 2020 - Accounts receivable in 2021 = $83,220 - $67,480 = $15,740

w.3: Decrease in inventory = Inventory in 2020 - Inventory in 2019 = 181220 190480 = -$9,260

w.4: Decrease in accounts payable = Accounts payable in 2020 - Accounts payable in 2019 = ($35,220 - $48,480) = $13,260

w.5: Sales of land = Land in 2019 - Land in 2020 = ($111,480 - $72,220) = $39,260

w.6: Purchase of equipment = Equipment in 2020 - Equipment in 2019 = $261,220- $201,480 = $59,740