June 30, 2008/2007
Assets
Cash- 34,700/23,500
accounts receivable- 101,600/92,300
inventory- 146,300/142,100
Investment-0/50,000
Land-145,000/0
equipment- 215,000/175,500
accumulated depreciation- (53,400)/(41,300)
2008= 594,000 /2007=442,100
liabilities and stockholders equity
accounts payable(merchandise creditors)- 100,900/95,200
Accrued expense(operating expenses)- 15,000/13,200
Dividends payable- 12,500/10,000
common stock, $1 par- 56,000/50,000
paid in capital in excess of par- common stock- 220,000/100,000
2008=594,000/ 2007= 442,100
a. Equipment and land were acquired for cash
b. There were no disposal of equipment during the year
c. The investments were sold for 45,000 cash
d. The common stock was issued for cash
e. There was a 65,900 credit to retained earning for net income
f. There was a 50,000 debit to retained earning for cash dividends declared.
Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities
To prepare a statement of cash flows using the indirect method of presenting cash flows from operating activities, we need to analyze the changes in the balance sheet accounts and supporting information provided.
The statement of cash flows consists of three sections: operating activities, investing activities, and financing activities. In this case, we will focus on the operating activities section as specified in the question.
First, let's determine the net cash provided by or used in operating activities. To calculate this, we need to adjust the net income for non-cash expenses and changes in working capital. The given information provides some relevant details:
1. Start with Net Income: There was a $65,900 credit to retained earnings for net income in 2008.
2. Non-cash Expenses: We need to account for depreciation expenses. From the given information, the accumulated depreciation increased by $12,100 (53,400 - 41,300) in 2008 and $12,100 (53,400 - 41,300) in 2007. Therefore, we add these amounts to the net income.
Net Income (2008) = $65,900 + $12,100 = $78,000
Net Income (2007) = $65,900 + $12,100 =$78,000
3. Changes in Working Capital: We need to consider changes in current assets and current liabilities. The information provides the following details:
Change in Accounts Receivable:
2008 - 2007 = 101,600 - 92,300 = $9,300 increase
Change in Inventory:
2008 - 2007 = 146,300 - 142,100 = $4,200 increase
Change in Accounts Payable (Merchandise Creditors):
2008 - 2007 = 100,900 - 95,200 = $5,700 increase
Change in Accrued Expense (Operating Expenses):
2008 - 2007 = 15,000 - 13,200 = $1,800 increase
4. Now, we can calculate the net cash provided by or used in operating activities:
Net Cash Provided by Operating Activities (2008) = Net Income (2008) + Depreciation Expense (2008) + Changes in Working Capital = $78,000 + $12,100 + ($9,300 + $4,200 - $5,700 + $1,800) = $100,400
Net Cash Provided by Operating Activities (2007) = Net Income (2007) + Depreciation Expense (2007) + Changes in Working Capital = $78,000 + $12,100 + ($0 + $0 - $5,900 - $300) = $84,900
Now that we have calculated the net cash provided by or used in operating activities for both 2008 and 2007, we can proceed with preparing the statement of cash flows.