Question

The comparative balance sheet of Olson-Jones Industries Inc. for December 31, 2012 and 2041, is as follows: Dec. 31, 20Y2 Dec. 31, 20Y1 Assets 3 Cash $486.00 $158.00 4 Accounts receivable (net) 280.00 195.00 Inventories 172.00 110.00 6 Land 400.00 453.00 1 Equipment 172.00 Accumulated depreciation-equipment 223.00 (60.00) $1,501.00 (27.00) Total assets $1,061.00 Liabilities and Stockholders' Equity $180.00 $161.00 11 Accounts payable (merchandise creditors) 12 Dividends payable 32.00 17 common stock 1 10 on ΑΓ ΔΟ

Answer 1

Solution:
A)
Olson-Jones Industries Inc
Statement of Cash Flows for the year ended December 31, 20Y2
Cash Flows from operating activities:
Net income	$    299.00
Adjustment to reconcile net income to net cash flow from operating activities:
Add:Depreciation ($60-$27)	$      33.00
Less: Gain on sale of land	$    (67.00)
Changes in Current operating assets and liabilities:
Increase in accounts receivable ($195-$280)	$    (85.00)
Increase in Inventory ($110-$172)	$    (62.00)
Increase in accounts payable ($180-$161)	$      19.00
Net cash flow from operating activities		$      137.00
Cash Flows from Investing Activities:
Cash Received from sale of land	$    120.00
Less: Cash paid for purchase of equipment (172-223)	$    (51.00)
Net cash from Investing Activities:		$        69.00
Cash Flows from Financing Activities:
Cash Received from sale of common stock ($105-45)	$      60.00
Paid in capital ($247-$121)	$    126.00
Less:Cash paid for dividends	$    (64.00)
Net Cash from Financing Activities:		$      122.00
Increase in Cash		$      328.00
Cash at the beginning of the year		$      158.00
Cash at the end of the year		$      486.00
Workings:
Calculation of gain/loss on sale of land
Opening bal land	$    453.00
Closing bal land	$ (400.00)
Book value of land	$      53.00
Sale value of land	$    120.00
Profit on sale of land ($120-$53)	$      67.00
Dividends:
Dividends debited to retained earnings	$      96.00
Less:Dividends payable	$    (32.00)
Dividends paid	$      64.00
B)
Net income	$299
Net cash flow from operation	($137)
	$162
Net income is higher than cash flow from operations
Source of this difference :
Add:Depreciation (Non cash expense , therefore added back	$      33.00
Less: Gain on sale of land (Gain on sale is not a business activity, therefore added back)	$    (67.00)
Changes in Current operating assets and liabilities:
Increase in accounts receivable (cash not received from accounts receivable, therefore increase is deducted)	$    (85.00)
Increase in Inventory ($110-$172) (cash blocked in purchase of inventory)	$    (62.00)
Increase in accounts payable ($180-$161) (Cash not paid to accounts payable)	$      19.00
Source of this difference	$ (162.00)