Question

Use the following information regarding the Newcastle Corporation to prepare a statement of cash flows using the indirect method:

Accounts payable decrease $9,100
Accounts receivable increase 12,740
Wages payable decrease 5,460
Amortization expense 29,120
Cash balance, January 1 54,600
Cash balance, December 31 12,740
Cash paid as dividends 10,920
Cash paid to purchase land 182,000
Cash paid to retire bonds payable at par 136,500
Cash received from issuance of common stock 81,900
Cash received from sale of equipment 21,840
Depreciation expense 70,980
Gain on sale of equipment 25,480
Inventory increase 23,660
Net income 174,720
Prepaid expenses increase 14,560

Answer 1

Answer and Explanation:

The preparation of the cash flow statement is presented below;

Cash Flows from Operating activities

Net income $174,720

Adjustments made

Less: Accounts payable decrease ($9,100)

Less Accounts receivable increase ($12,740)

Less: Wages payable decrease ($5,460)

Add: Amortization expense $29,120

Add: Depreciation expense $70,980

Less: Gain on sale of equipment ($25,480)

Less: Inventory increase ($23,660)

Less; Prepaid expenses increase ($14,560)

Net Cash Flows from Operating activities $183,820

Cash Flows from Investing activities

Cash paid to purchase land ($182,000)

Add: Cash received from the sale of equipment $21,840

Net Cash flows from Investing activities ($160,160)

Cash Flows from Financing Activities

Cash paid as dividends ($10,920)

Less; Cash paid to retire bonds payable at par ($136,500)

Add: Cash received from the issuance of common stock $81,900

Net Cash Flows from Financing activities ($65,520)

Net Increase (Decrease) in Cash ($41,860)

Add: Cash balance, January 1 $54,600

Cash balance, December 31 $12,740