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Problem-Solving Strategy

Problem 16-1 (Algorithmic)
Statement of Cash Flows—Indirect Method

The comparative balance sheet of Mavenir Technologies Inc. for December 31, 2013 and 2012, is shown as follows:
Dec. 31, 2013 Dec. 31, 2012
Cash $225,130 $209,670
Accounts receivable (net) 81,560 75,300
Inventories 230,230 222,960
Investments 0 86,380
Land 118,090 0
Equipment 254,020 197,120
Accumulated depreciation-equipment (59,470) (53,160)
Total $849,560 $738,270

Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors) $153,770 $145,440
Accrued expenses payable (operating expenses) 15,290 19,200
Dividends payable 8,500 6,640
Common stock, $10 par 45,880 36,180
Paid-in capital in excess of par-common stock 172,460 100,400
Retained earnings 453,660 430,410
Total $849,560 $738,270

The following additional information was taken from the records:

The investments were sold for $101,060 cash.
Equipment and land were acquired for cash.
There were no disposals of equipment during the year.
The common stock was issued for cash.
There was a $57,950 credit to Retained Earnings for net income.
There was a $34,700 debit to Retained Earnings for cash dividends declared.


Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use a minus sign to indicate cash outflows, negative amounts or a decrease in cash.

Mavenir Technologies Inc.
Statement of Cash Flows
For the Year Ended December 31, 2013
Cash flows from operating activities:


Adjustments to reconcile net income to net cash flow from operating activities:

Changes in current operating assets and liabilities:

Net cash flow from operating activities

Cash flows from investing activities:



Net cash flow used for investing activities

Cash flows from financing activities:


Net cash flow provided by financing activities

Cash at beginning of the year

Cash at end of the year


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Calculate the increases and decreases in the accounts. Start with net income and add back all noncash expenses. Add decreases in assets and increases in liabilities. Subtract decreases in liabilities and increases in assets. Losses and gains are a result of investing activities. They are added to or subtracted from net income.
Cash flows from investing activities are the result of transactions affecting investments in noncurrent assets, including fixed assets, intangibles, and investments.
Cash flows from financing activities are the result of transactions affecting the debt and equity, including bonds, notes payable, and preferred and common stock.

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