Question

John's Rocket Science Corporation Cash Flow Statement For the year ended December 31, 2019 Financing Activities Issue common shares 100,000 Pay dividends on common shares 50.000 150.000 Operating Activities Net income for the year $450,000 Add back depreciation expense (35,000) Change in non-cash current assets (18,000) Change in non-cash current liabilities 24.000 $421,000 Investing Activities Proceeds on sale of land 350,000 Purchase of land for new office (1.700.000). (1.350.000) TOTAL CHANGE IN CASH FOR THE YEAR ($779,000) OPENING CASH AND EQUIVALENT $800.000 YEAR END BALANCE IN CASH & EQUIVALENT $ 91.000 The controller has come to you asking for help in correcting the above statement. The company is following ASPE standards. Please click all of the answers below which would indicate problems that need to be corrected in the statement. Do not click any boxes which do not apply, as this will diminish your mark. Notes: When corrected, the statement will balance. Each of the subtotals adds correctly. The total change in cash also adds correctly from the subtotals above. Both opening and closing cash balances are correct.

Answer 1

Following needs to be change -

1. Pay dividends on common shares should be included in investing Activities.

2. "Add back depreciation expenses" should be a positive number, i.e. 35,000.

3. The activities are not in the correct order.

5. The balance of "Pay dividends on common shares" should be negative. i.e. (50,000)

Changing above things in the cash flow statement will balance the cash flow.

Correcting order definately don not required to balance the cash flow but those changes are required for the purpose of disclosure.