Question

Vero Company Comparative Balance Sheets December 31 Assets Cash Accounts receivable 2020 $63,000 85,000 170,000 75,000 270,000 2019 $ 22,000 76,000 189,000 100,000 200,000 Inventory Land Equipment Accumulated depreciation-equipment Total $597,000 $555,000 Liabilities and Stockholders' Equity Accounts payable $ 39,000 $ 47,000 Bonds payable Common stock ($1 par) 150,000 216,000 192.000 200,000 174,000 134.000 Retained earnings Total $597,000 $555,000 Additional information: 1. Net income for 2020 was $93.000. 2. Cash dividends of $35,000 were declared and paid. 3. Bonds payable amounting to $50,000 were redeemed for cash $5 4. Common stock was issued for $42.000 cash. 5. No equipment was sold during 2020. but land was sold at cost.

Answer 1

Solution

Velo Company
Cash Flow Statement
For the ended december 31, 2020
Cash Flow from Operating Activities:
Net Income		$      93,000.00
Adjustments to reconcile net income to
Net cash flow from operating activities
Depreciation expense	$       34,000.00
Increase in Accounts receivables	$       (9,000.00)
Decrease in Inventory	$       19,000.00
Decrease in accounts payable	$       (8,000.00)
		$      36,000.00
A. Cash Flow from Operating Activities		$    129,000.00
Cash Flow from Investing Activities:
Sale of land	$       25,000.00
Purchase of Equipment	$     (70,000.00)
B. Cash flow from Investing Activities		$    (45,000.00)
Cash Flow from Financing Activities:
Issue of Common Stock	$       42,000.00
Dividend paid	$     (35,000.00)
Redemption of bonds	$     (50,000.00)
C. Cash Flow from Financing Activities		$    (43,000.00)
Increase (Decrease) in cash [A+B+C]		$      41,000.00
Add: cash at the beginning of the year		$      22,000.00
Cash at the end of the year		$      63,000.00

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.General notes for cash flow
Cash is increased when Current liability increase or Current asset Decrease.
Cash is Decreased when Current liability Decrease or Current asset Increase.
Depreciation or loss on sale of any asset is a non cash expense hence it will be added to net income to get operating cash
Profit on sale of asset or investment is a non cash profit and hence will be deducted from operating income.