Question

Statement of Cash Flows—Indirect Method

The following balances are available for Chrisman Company:
December 31
2017 2016
Cash $9,700 $12,100
Accounts receivable 24,300 18,200
Inventory 19,300 32,200
Prepaid rent 10,900 7,300
Land 90,900 90,900
Plant and equipment 485,000 363,800
Accumulated depreciation (78,800) (36,400)
Totals $561,300 $488,100
Accounts payable $14,600 $12,100
Income taxes payable 3,600 6,100
Short-term notes payable 42,400 30,300
Bonds payable 91,000 121,000
Common stock 242,500 181,900
Retained earnings 167,200 136,700
Totals $561,300 $488,100
Bonds were retired during 2017 at face value, plant and equipment were acquired for cash, and common stock was issued for cash. Depreciation expense for the year was $42,400. Net income was reported at $30,500.
Required:
Prepare a statement of cash flows for 2017 using the indirect method in the Operating Activities section. Use the minus sign to indicate cash payments, cash outflows, or decreases in cash.

Answer 1

Answer and Explanation:

The preparation of the cash flow statement using the indirect method is as follows;

Cash flows from operating activities

Net Income $30,500.00

Add: Depreciation $42,400.00

Less: Decrease in income taxes payable ($2,500.00)

Less: Increase in AR ($6,100.00)

Add: Decrease in inventory $12,900.00

Less: Increase in prepaid rent ($3,600.00)

Add: Increase in AP $2,500.00

Add: Increase in short term notes payable $12,100.00

Net Cash flow from operating activities $88,200.00

Cash flow from Investing activities

Purchase of PPE ($121,200.00)

Net Cash flow from Investing activities ($121,200.00)

Cash flow from Financing activities

Redemption of Bonds ($30,000.00)

Issue of Stock $60,600.00

Net Cash flow from Financing activities $30,600.00

Increase or decrease in cash -$2,400

Add: Opening cash and cash equivalents $12,100.00

Closing cash and cash equivalents $9,700.00