Question

A.The loss on the cash sale of equipment was $4,375 (details in b).B. Sold equipment costing $97,875, with accumulated depreciation of $47,125, for $28,625 cash.C. Purchased equipment costing $113,375 by paying $64,000 cash and signing a long-term note payable for the balance.D. Borrowed $5,700 cash by signing a short-term note payable.E. Paid $58,625 cash to reduce the long-term notes payable.F. Issued 4,200 shares of common stock for $20 cash per share.G. Declared and paid cash dividends of $53,500.Prepare a complete statement of cash flows; report its operating activities using the indirect method.

Answer 1

Cash Flow Statement

Cash flow from Operating Activities

Adjustment for Non - Cash items :

loss on the cash sale of equipment $4,375

Adjustment for Working Capital items :

Increase in short-term note payable $5,700

Net Cash from Operating Activities $10,075

Cash flow from Investing Activities

Proceeds from sale of equipment $28,625

Purchase of Equipment ($64,000)

Net Cash from Investing Activities ($35,375)

Cash flow from Financing Activities

Repayment of the long-term notes payable ($58,625)

Issue of Common Stocks $84,000

Dividend Paid ($53,500)

Net Cash from financing Activities ($28,125)

Movement During the Year ($53,425)

Step-by-step explanation:

The Indirect method reconciles the Operating Profit to the Cash Flow from Operating Activities by adjusting the following items, (1) Non-cash items previously included or deducted from the Operating Profit and (2) Changes in Working Capital items.