Question

Complete the following Spreadsheet for the preparation of statement of cash flows under the indirect method. (The statement of cas flows is not required.) (Enter all amounts as positive values.)

Additional information:
a. Net income for the year was $100,000.
b. Dividends of $80,000 cash were declared and paid.
c. The only noncash expense was $70,000 of depreciation
d. Purchased plant assets for $70,000 cash.
e. Notes payable of $20,000 were issued for $20,000 cash.
f. $70,000 increase in accounts receivable.
g. $20,000 decrease in inventory.
h. $10,000 decrease in accounts payable.

Answer 1

Eastern Outfitters, LLC

Statement of Cash Flows (Indirect Method)

Net Income + Depreciation - WC changes = $80,000

Plant asset purchase - note issuance + dividend payment = $(70,000)

Net increase in cash & equivalents = $30,000

Eastern Outfitters, LLC

Statement of Cash Flows (Indirect Method)

For the Year Ended December 31, 2023

| Description | Amount |

| Operating Activities: | |

| Net income | $100,000 |

| Adjustments to reconcile net income to cash flow from operating activities: | |

| Depreciation | $70,000 |

| Changes in working capital: | |

| (Increase) in accounts receivable | $(70,000) |

| (Decrease) in inventory | $20,000 |

| (Decrease) in accounts payable | $10,000 |

| Cash flow from operating activities | $80,000 |

| Investing Activities: | |

| Purchase of plant assets | $(70,000) |

| Cash flow from investing activities | $(70,000) |

| Financing Activities: | |

| Issuance of notes payable | $20,000 |

| Payment of dividends | $(80,000) |

| Cash flow from financing activities | $(60,000) |

| Net increase in cash and cash equivalents | $30,000 |

Notes:

• Positive numbers represent cash inflows, while negative numbers represent cash outflows.
• Adjustments to reconcile net income to cash flow from operating activities consider non-cash expenses like depreciation and changes in working capital.
• Cash flow from investing activities primarily shows the purchase of plant assets.
• Cash flow from financing activities includes the issuance of notes payable and payment of dividends.
• The final line shows the net increase in cash and cash equivalents for the year, which is $30,000.