Question

The following is a condensed version of the comparative balance sheets for Sheffield Corporation for the last two years at December 31.

2020 2019
Cash $265,500 $117,000
Accounts receivable 270,000 277,500
Investments 78,0001 11,000
Equipment 447,000 360,000
Accumulated Depreciation-Equipment (159,000) (133,500)
Current liabilities 201,000 226,500
Common stock 240,000 240,000
Retained earnings 460,500 265,500

Additional information:

a. Net income for 2022 was $55,800.
b. Depreciation expense was $20,400.
c.Cash dividends of $23,400 were declared and paid.
d. Bonds payable amounting to $30,000 were redeemed for cash $30,000.
e. Common stock was issued for $25,200 cash.
f. No equipment was sold during 2022.
g. Land was sold for its book value.

Required:
Prepare a statement of cash flows for 2020 using the indirect method.

Answer 1

Sheffield Corporation

Statement of Cash Flows

For the year ended December 31, 2020

Net Income $55,800

Non-cash expense:

Depreciation 20,400

Net Cash from operation $35,400

Working capital changes:

Accounts receivable 7,500

Current liabilities (25,500)

Net cash from operating activities $17,400

Investing activities:

Investments 33,000

Financing activities:

Common Stock 25,200

Bonds payable (30,000)

Dividends (23,400) (28,200)

Net cash flows $22,200

Step-by-step explanation:

a) Data and Calculations:

Sheffield Corporation

Comparative Balance Sheet

For the two years at December 31:

2020 2019 Inflow / outflow

Cash $265,500 $117,000

Accounts receivable 270,000 277,500 $7,500

Investments 78,000 111,000 33,000

Equipment 447,000 360,000

Accumulated Depreciation

-Equipment (159,000) (133,500)

Current liabilities 201,000 226,500 25,500

Common stock 240,000 240,000

Retained earnings 460,500 265,500