Question

The differences in Beal Inc.’s balance sheet accounts at December 31, 2006 and 2005, are presented below.

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Increase (Decrease)
Assets
Cash and cash equivalents $ 120,000
Available-for-sale securities 300,000
Accounts receivable, net --
Inventory 80,000
Long-term investments (100,000)
Plant assets 700,000
Accumulated depreciation --
$1,100,000
Liabilities and Stockholders’ Equity
Accounts payable and accrued liabilities $ (5,000)
Dividends payable 160,000
Short-term bank debt 325,000
Long-term debt 110,000
Common stock, $10 par 100,000
Additional paid-in capital 120,000
Retained earnings 290,000
$1,100,000
The following additional information relates to 2006:
a. Net income was $790,000.
b. Cash dividends of $500,000 were declared.
c. Building costing $600,000 and having a carrying amount of $350,000 was sold for $350,000.
d. Equipment costing $110,000 was acquired through issuance of long-term debt.
e. A long-term investment was sold for $135,000. There were no other transactions affecting long-term investments.
f. 10,000 shares of common stock were issued for $22 a share.
In Beal’s 2006 statement of cash flows,
1. Net cash provided by operating activities was
a. $1,160,000
b. $1,040,000
c. $ 920,000
d. $ 705,000
2. Net cash used in investing activities was
a. $1,005,000
b. $1,190,000
c. $1,275,000
d. $1,600,000
3. Net cash provided by financing activities was
a. $ 20,000
b. $ 45,000
c. $150,000
d. $205,000

Answer 1

Part 1

Cash Provided by Operating Activities is $705,000

Part 2

Cash Used by Investing Activities is $405,000

Part 3

Cash Provided by Financing Activities is $205,000

Step-by-step explanation:

Cash flow from Operating Activities

Net income $790,000

Adjustment for changes in working capital items :

Increase in Inventories ($80,000)

Decrease in Accounts Payable ($5,000)

Net Cash Provided by Operating Activities $705,000

Cash flow from Investing Activities

Proceeds From Sale of Building $350,000

Proceeds From Sale of long-term investments $135,000

Purchase of Available-for-sale securities ($300,000)

Purchase of Plant assets ($590,000)

Net Cash Used by Investing Activities ($405,000)

Cash flow from Financing Activities

Dividends Paid $500,000 - $160,000 ($340,000)

Increase in Short-term bank debt $325,000

Issue of Common Stock $220,000

Net Cash Provided by Financing Activities $205,000