Question

The following information is related to Alpha Company's fiscal year 2017.

Income Statement:
Net Income $300,000
Depreciation Expense 50,000
Gain on Sale of Plant Assets 10,000
Interest Expense 500

Balance Sheet - 12/31/17:
Increase (Decrease) Accounts Payable ($4,000)
Plant Assets - Purchased 250,000
Plant Assets - Disposals (100,000)

Additional Information:
Cash Balance - 12/31/2016: $50,000
Common Stock exchanged for outstanding Long Term Notes Payable of $125,000
Dividends paid were $25,000

Use this information to prepare the Statement of Cash Flows for Alpha Company using the indirect method.

Answer 1

The preparation of cash flows is shown below:-

Step-by-step explanation:

Cash flow under indirect method

Cash flow from operating activity

Net income $300,000

Depreciation $50,000

Gain on Sale of Plant Assets ($10,000)

Decrease accounts payable ($4,000)

Net cash flow from operating activity $336,000

Cash flow from operating activity

Plant Assets Purchased ($250,000)

Plant Assets Disposals $110,000

($100,000 + $10,000)

Net cash flow from investing activity ($140,000)

Cash flow from financing activity

Paid dividend ($25,000)

Net cash flow from financing activity ($25,000)

Net cash flow $171,000

Beginning cash $50,000

Ending cash $221,000

Note :- we will not considered Common Stock exchanged for outstanding Long Term Notes Payable of $125,000 because this is a non cash investing/financing activity.