Question

Condensed financial data of Blue Spruce Corp. follow. Blue Spruce Corp. Comparative Balance Sheets December 31 Assets 2020 2019 Cash $118,300 $47,700 Accounts receivable 91,000 33,900 Inventory 112,200 102,000 Prepaid expenses 29,700 26,000 Investments 139,800 113,800 Equipment 265,600 241,400 Accumulated depreciation-equipment (47,200 ) (52,400 ) Total $709,400 $512,400 Liabilities and Stockholders’ Equity Accounts payable $111,800 $67,200 Accrued expenses payable 16,500 17,000 Bonds payable 111,800 149,800 Common stock 219,700 174,200 Retained earnings 249,600 104,200 Total $709,400 $512,400 Blue Spruce Corp. Income Statement For the Year Ended December 31, 2020 Sales revenue $393,000 Less: Cost of goods sold $134,900 Operating expenses, excluding depreciation 11,500 Depreciation expense 30,600 Income tax expense 26,400 Interest expense 4,800 Loss on disposal of plant assets 7,500 215,700 Net income $177,300 Additional information: 1. New equipment costing $80,200 was purchased for cash during the year. 2. Old equipment having an original cost of $56,000 was sold for $12,700 cash. 3. Bonds matured and were paid off at face value for cash. 4. A cash dividend of $31,900 was declared and paid during the year. Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1

Blue Spruce Corp statement of cash flows for the year end December 31,2020

Cash flow from Operating Activities

Net income 177,300

Adjustments for Non-Cash items :

Depreciation expense (30,600 + 11,500) 42,100

Loss on disposal of plant assets 7,500

Adjustments for Changes in Working Capital items :

Increase in Accounts Receivable (57,100)

Increase in Inventory (10,200)

Increase in Prepaid Expenses (3,700)

Increase in Accounts Payable 44,600

Decrease in Accrued Expense Payable (500)

Cash generated from Operations 200,000

Income tax expense paid (26,400)

Interest expense paid (4,800)

Cash flow from Operating Activities 168,800

Cash flow from Investing Activities

Purchase of Equipment (80,200)

Proceeds from Sale of Equipment 12,700

Increase in Investments (26,000)

Cash flow from Investing Activities (93,500)

Cash flow from Financing Activities

Increase in Common Stock 45,500

Repayment of Bonds (31,800)

Dividends Paid (31,900)

Cash flow from Financing Activities (18,200)

Movement during the year 70,600

Cash and Cash Equivalents at Beginning of the year 47,700

Cash and Cash Equivalents at End of the year 118,300

Step-by-step explanation:

Cash flow Statement is Prepared under the Following Headings :

1. Cash flow from Operating Activities
2. Cash flow from Investing Activities
3. Cash flow from Financing Activities