Question

Karr, Inc., reported net income of $300,000 for 2011. Changes occurred in several balance sheet accounts as follows:

Equipment $25,000 Increase
Inventories $20,000 decrease
Accumulated depreciation 40,000 Increase
Accounts receivable 15,000 Increase
Note payable 30,000 increase
Accounts payable 5,000 decrease
Additional Information:
a. During 2011 Karr sold equipment costing $25,000, with accumulated depreciation of $12,000, for a gain of $5,000.
b. In December 2011 Karr purchased equipment costing $50,000, with $20,000 cash and a 12% note payable of $30,000.
c. Depreciation expense for the year was $52,000.
Required:
1. In Karr’s 2011 statement of cash flows, calculate net cash provided by operating activities.
2. In Karr’s 2011 statement of cash flows, calculate net cash used in investing activities.

Answer 1

Answer:Cash flow from operating activities = $347,000

Net cash used in Investing:= -$2,000

Step-by-step explanation:

1.

The net cash provided by operating activities by Karr, Inc., reported in 2011

Account Titles and explanation Amount

Net income $300,000

Adjustments made

Add:

Depreciation expense $52,000

Decrease in inventory $20,000

Less:

Increase in account receivable -$15,000

Decrease in account payable -$5,000

Gain on sale of equipment -$5,000

Cash flow from operating activities $347,000

2. Net cash used in Investing:

Sales of equipment =cost -depreciation + gain of sale

Sales of equipment 18,000(($25,000-$12,000+$5,000)

Purchase of Equipment 20,000

Net cash used in Investing:= -$2,000