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		$136		$44
Accounts receivable (net)		78		55
Inventories		49		30
Land		112		127
Equipment		63		48
Accumulated depreciation-equipment		(17)		(9)
	Total Assets	$421		$295
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)		$53		$44
Dividends payable		8		-
Common stock, $1 par		28		14
Paid-in capital: Excess of issue price over par—common stock		67		35
Retained earnings		265		202
	Total liabilities and stockholders' equity	$421		$295

The following additional information is taken from the records:

1. Land was sold for $38.
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 $91 credit to Retained Earnings for net income.
6. There was a $28 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 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 from sale of land	$
Cash used for purchase of equipment
Net cash flow from investing activities
Cash flows from (used for) financing activities:
Cash from sale of common stock	$
Cash used for dividends
Net cash flow from financing activities
Increase in cash		$
Cash at the beginning of the year
Cash at the end of the year		$

b. Was Olson-Jones Industries Inc.’s net cash flow from operations more or less than net income?
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Answer 1

Olson-Jones Industries Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y2
Cash flows from operating activities:
Net income	91
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation	8
Gain on sale of land	-23
Changes in current operating assets and liabilities:
Increase in accounts receivable	-23
Increase in inventories	-19
Increase in accounts payable	9
Net cash flow from operating activities		43
Cash flows from (used for) investing activities:
Cash from sale of land	38
Cash used for purchase of equipment	-15
Net cash flow from investing activities		23
Cash flows from (used for) financing activities:
Cash from sale of common stock	46
Cash used for dividends	-20
Net cash flow from financing activities		26
Increase in cash		92
Cash at the beginning of the year		44
Cash at the end of the year		136
b
Net cash flow from operations was less than net income