Question

The comparative Balance Sheets and the Income statement for the Marine Corporation are as follow:

Marine Corporation	Balance Sheet
Assets	2018	2019
Cash	$45,000	$50,000
Marketable Securities	175,000	160,000
Accounts Receivable	240,000	220,000
Inventories	230,000	275,000
Investments	70,000	55,000
Total current assets	$760,000	$760,000
Plant and Equipment	1,300,000	1,550,000
Less Accumulated Amortization	450,000	600,000
Net plant and Equipment	$850,000	$950,000
Total Assets	1,610,000	1,710,000

LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$110,000	$85,000
Notes payable	65,000	10,000
Accrued Expenses	30,000	5,000
Income Taxes Payable	5,000	10,000
Bonds Payable (2016)	800,000	900,000
Common Stock (100,000 shares)	200,000	200,000
Retained Earnings	400,000	500,000
Total Liabilities’ and Shareholders’ Equity	$1,610,000	$1,710,000

Marine Corporation Income Statement For the Year Ended December 31, 2019
Sales	$ 5,500,000
Less: Cost of Goods Sold	4,200,000
Gross Profit	1,300,000
Less: Selling, General & Administrative Expenses	260,000
Operating profit	1,040,000
Less: Amortization Expense	150,000
Earnings Before Interest and Taxes	890,000
Less: Interest Expense	90,000
Earnings Before Taxes	800,000
Less: Taxes (50%)	400,000
Net Income	$ 400,000

Required:

Prepare a Statement of Cash Flows in good form for the year ended December 31, 2019 using the Indirect Method?

Answer 1

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Workings- Indirect Method
Decrease in Marketable Securities	Amount $
Closing Balance	160,000.00
Less: Opening Balance	175,000.00
Decrease in Marketable Securities	(15,000.00)
Decrease in Accounts Receivable
Closing Balance	220,000.00
Less: Opening Balance	240,000.00
Decrease in Accounts Receivable	(20,000.00)
Increase in Inventory
Closing Balance	275,000.00
Less: Opening Balance	230,000.00
Increase in Inventory	45,000.00
Decrease in Investments
Closing Balance	70,000.00
Less: Opening Balance	55,000.00
Decrease in Investments	15,000.00
Decrease in Accounts Payable
Closing Balance	85,000.00
Less: Opening Balance	110,000.00
Decrease in Accounts Payable	(25,000.00)
Decrease in Accrued Expenses
Closing Balance	5,000.00
Less: Opening Balance	30,000.00
Decrease in Accrued Expenses	(25,000.00)
Increase in Income Taxes Payable
Closing Balance	10,000.00
Less: Opening Balance	5,000.00
Increase in Income Taxes Payable	5,000.00
Decrease in Notes payable
Closing Balance	10,000.00
Less: Opening Balance	65,000.00
Decrease in Notes payable	(55,000.00)
Plant and Equipment purchased
Closing Balance	1,550,000.00
Less: Opening Balance	1,300,000.00
Plant and Equipment purchased	250,000.00
Bonds Payable Issued
Closing Balance	900,000.00
Less: Opening Balance	800,000.00
Bonds Payable Issued	100,000.00
Dividends paid
Opening Balance- Retained Earnings	400,000.00
Add: Net Income	400,000.00
Less: Closing Balance- Retained Earnings	500,000.00
Dividends paid	300,000.00

Marine
Cashflow statement	Amount $	Amount $
Particulars
Net Income		400,000.00
Adjustment to reconcile Net Income to Net Cash
Add:
Amortization Expense		150,000.00
Cash flow from Operations		550,000.00
Changes in Current Assets/Current Liabilities
Decrease in Marketable Securities	15,000.00
Decrease in Accounts Receivable	20,000.00
Increase in Inventory	(45,000.00)
Decrease in Investments	15,000.00
Decrease in Accounts Payable	(25,000.00)
Decrease in Notes payable	(55,000.00)
Decrease in Accrued Expenses	(25,000.00)
Increase in Income Taxes Payable	5,000.00	(95,000.00)
Net cash provided by operating activities		455,000.00
Cash flow from investing activities
Plant and Equipment purchased	(250,000.00)
Net cash use for investing activities		(250,000.00)
Cash flow from financing activities
Bonds Payable Issued	100,000.00
Dividends paid	(300,000.00)
Net cash used for financing activities		(200,000.00)
Net Increase/(Decrease) in cash		5,000.00
Cash Balance, beginning		45,000.00
Cash Balance, ending		50,000.00