Question

Additional data obtained from the income statement and from an examination of the accounts in the ledger for 20Y8 are as follows:

a. Net income, $151,500.
b. Depreciation reported on the income statement, $40,140.
c. Equipment was purchased at a cost of $78,820 and fully depreciated equipment costing $21,400 was discarded, with no salvage realized.
d. The mortgage note payable was not due for six years, but the terms permitted earlier payment without penalty.
e. 7,000 shares of common stock were issued at $18 for cash.
f. Cash dividends declared and paid, $92,320.

Required:
Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.

Answer 1

Cash flow from Operating Activities

Net income, $151,500

Adjustment for Non-Cash items :

Depreciation $40,140

Cash flow from Operating Activities $191,640

Step-by-step explanation:

To determine cash flow from Operating Activities, consider only those items related to trading in the ordinary course of business.

Note that the indirect method is required for this question.