Question

Statement of Cash Flows—Indirect Method

The comparative balance sheet of Olson-Jones Industries Inc. for December 31, 20Y2 and 20Y1, is as follows:

		Dec. 31, 20Y2		Dec. 31, 20Y1
Assets
Cash		$183		$14
Accounts receivable (net)		55		49
Inventories		117		99
Land		250		330
Equipment		205		175
Accumulated depreciation—equipment		(68)		(42)
	Total assets	$742		$625
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)		$51		$37
Dividends payable		5		-
Common stock, $1 par		125		80
Paid-in capital in excess of par—common stock		85		70
Retained earnings		476		438
	Total liabilities and stockholders' equity	$742		$625

The following additional information is taken from the records:

1. Land was sold for $120.
2. Equipment was acquired for cash.
3. There were no disposals of equipment during the year.
4. The common stock was issued for cash.
5. There was a $62 credit to Retained Earnings for net income.
6. There was a $24 debit to Retained Earnings for cash dividends declared.

a. Prepare a statement of cash flows, using the indirect method of presenting Cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

Olson-Jones Industries, Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y2
Cash flows from (used for) operating activities:
Net income	$
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation
Gain on sale of land
Changes in current operating assets and liabilities:
Increase in accounts receivable
Increase in inventories
Increase in accounts payable
Net cash flow from operating activities		$
Cash flows from (used for) investing activities:
Cash received from sale of land	$
Cash paid for purchase of equipment
Net cash flow from investing activities
Cash flows from (used for) financing activities:
Cash received from sale of common stock	$
Cash paid for dividends
Net cash flow from financing activities
Net increase in cash		$
Cash balance, January 1, 20Y2
Cash balance, December 31, 20Y2		$

Answer 1

Olson-Jones Industries, Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y2
Cash flows from (used for) operating activities:
Net income	$62
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation	26
Gain on sale of land	- 40
Changes in current operating assets and liabilities:
Increase in accounts receivable	- 6
Increase in inventories	- 18
Increase in accounts payable	14
Net cash flow from operating activities		$38
Cash flows from (used for) investing activities:
Cash received from sale of land	$120
Cash paid for purchase of equipment	- 30
Net cash flow from investing activities		90
Cash flows from (used for) financing activities:
Cash received from sale of common stock	$60
Cash paid for dividends	- 19
Net cash flow from financing activities		41
Net increase in cash		$169
Cash balance, January 1, 20Y2		14
Cash balance, December 31, 20Y2		$183

Cash dividend paid = Cash dividend declared - Increase in dividend payable

= 24 - 5

= $19

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