Question

Problem #2 Listed below in random order are line items to be included in the statement of cash flows. Purchase of equipment Increase in inventory Increase in prepaid rent Payment of dividends Depreciation expense Increase in accounts receivable Increase in accounts payable Loss on sale of land Net income Repayment of notes payable Cash received from the sale of land Issuance of common stock $220,000 30,000 10,000 40,000 20,000 60,000 10,000 7,000 70,000 50,000 3,000 250,000 Prepare the statement of cash flows for CEO Consultants using the indirect method. Cash at the beginning of the period was $95,000; cash at the end of the period was $45,000.

Answer 1

Statement of Cash Flows (Indirect Method)
	Amount ($)	Amount ($)
Cash flows from Operating Activities
Net Income		70,000
Adjustments to reconcile net income to Net cash provided by operating activities
Add: Depreciation Expenses	20,000
Add: Loss on sale of land	7,000
Less: Increase in inventory	-30,000
Less: Increase in prepaid rent	-10,000
Less: Increase in accounts receivables	-60,000
Add: Increase in accounts payable	10,000	-63,000
Net cash provided by operating activities		7,000
Cash flows from Investing Activities
Less: Purchase of equipment	-220,000
Add: Cash received from sale of land	3,000
Net Cash used in Investing Activities		-217,000
Cash flows from Financing Activities
Add: Issuance of common stock	250,000
Less: Repayment of notes payable	-50,000
Less: Dividend paid	-40,000
Net Cash used in financing Activities		160,000
Net decrease in cash		-50,000
Add: Cash balance, at the beginning		95,000
Cash balance, at the end		45,000