Question

Eastern Corp. Use the following selected data and additional information from the records of Eastern Corp. to answer the questions that follow. Balance Sheet Data 2017 2016 Accounts receivable $ 36,000 $ 42,000 Inventories 28,000 25,000 Accounts payable 31,000 35,000 Salaries payable 2,000 1,000 Equipment 60,000 40,000 Accumulated depreciation 12,000 16,000 Bonds payable 50,000 100,000 Common stock 150,000 100,000 Retained earnings 38,000 20,000 Income Statement Data 2017 Net sales $420,000 Cost of goods sold 300,000 Operating expenses (excluding depreciation expense) 84,000 Net income 30,000 Gain on sale of equipment (included in net income above) 2,000 Additional information: • Equipment with a cost of $15,000 and a book value of $3,000 was sold for $5,000 during 2017. • Common stock was issued to retire bonds payable during 2017. • The only items affecting retained earnings in 2017 were net income and dividends declared and paid. Review the data for Eastern Corp. REQUIRED: Prepare the operating activities section of a statement of cash flows for Eastern Corp. for 2017 if the indirect method is used to determine net cash flow from operating activities.

Answer 1

Answer-

EASTERN CORP.
STATEMENT OF CASH FLOWS   PARTIAL (USING INDIRECT METHOD)
FOR THE YEAR ENDED DECEMBER 31,2017
Particulars		Amount
		$
Cash flow from operating activities
Net Income		30000
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation		4000
Gain on sale of equipment		-2000
Change in operating assets & liabilities
Decrease in accounts receivable		6000
Increase in inventory		-3000
Decrease in accounts payable		-4000
Increase in salaries payable		1000
Net cash flow from operating activities		32000