Question

The following information is available for Splish Brothers Corporation for the year ended December 31, 2022.

Beginning cash balance $35,000
Accounts payable decrease 4,000
Depreciation expense 81,000
Accounts receivable increase 8,100
Inventory increase 12,300
Net income 323,000
Cash received for sale of land at book value 35,000
Sales revenue 742,500
Cash dividends paid 11,100
Income tax payable increase 4,700
Cash used to purchase building 146,000
Cash used to purchase treasury stock 32,100
Cash received from issuing bonds 240,000
Prepare a statement of cash flows using the indirect method.

Answer 1

Answer and Explanation:

The preparation of the cash flow statement using the indirect method is shown below:

Splish Brothers Corporation

Cash flow Statement

For the year ended December 31, 2022

Cash Flow from Operating Activities

Net Income $323,000

Adjustments made

Add: Depreciation expense $81,000

Less: Decrease in Account payable -$4,000

Less: Increase in Account receivable -$8,100

Add: Increase in Income tax payable $4,700

Less: Increase in Inventory -$12,300

Net cash flow provided by the operating activities $61,300

Cash Flow from Investing Activities

Add: Cash received for sale of land at book value $35,000

Less: Cash used to purchase building -$146,000

Cash flow used by investing activities -$111,000

Cash Flow from Financing Activities

Less: Cash used to purchase treasury stock -32,100

Add: Cash received from issuing bonds 240,000

Less: Cash dividend paid -$11,100

Cash flow provided by financing activities $196,800

Net increase in cash $147,100

Add: Beginning cash balance $35,000

Closing Cash balance $182,100

The negative sign indicates the outflow of cash and the positive sign indicates the inflow of cash and the same is shown above