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, you need to analyze each transaction given in the question and categorize them into three main sections: operating activities, investing activities, and financing activities.
Let's break down each transaction and determine how it affects the cash flow from operating activities:
a. Equipment and land were acquired for cash: This transaction represents an investing activity because it involves the acquisition of long-term assets. There is no direct impact on the cash flow from operating activities.
b. There were no disposals of equipment during the year: Since there are no disposals of equipment, there is no impact on the cash flow from operating activities.
c. The investments were sold for $45,000 cash: This transaction represents an investing activity because it involves the sale of investments. The cash received of $45,000 is an increase in cash and should be reported as a positive adjustment to the cash flow from operating activities.
d. The common stock was issued for cash: This transaction represents a financing activity because it involves the issuance of common stock. The cash received from the issuance of stock should be reported as a positive adjustment to the cash flow from operating activities.
e. There was a $65,900 credit to retained earnings for net income: This transaction represents the net income earned during the year. Net income is already accounted for in the statement of cash flows while calculating the cash flow from operating activities.
f. There was a $50,000 debit to retained earnings for cash dividends declared: This transaction represents cash dividends paid to shareholders. Cash dividends declared are deducted from net income to calculate the cash flow from operating activities.
Based on the analysis above, you can now prepare the statement of cash flows using the indirect method. However, since the provided information is incomplete, it is not possible to provide an accurate statement of cash flows. To do so, you would need additional information like the opening and closing cash balance for the year and information regarding other operating, investing, and financing activities that occurred during the year.