Question

Portions of the financial statements for Parnell Company are provided below.

PARNELL COMPANY Income Statement For the Year Ended December 31, 2018 ($ in 000s)
Revenues and gains:
Sales	$	750
Gain on sale of buildings		11		$	761
Expenses and loss:
Cost of goods sold	$	275
Salaries		115
Insurance		35
Depreciation		118
Interest expense		45
Loss on sale of machinery		13			601
Income before tax					160
Income tax expense					80
Net income				$	80

PARNELL COMPANY Selected Accounts from Comparative Balance Sheets December 31, 2018 and 2017 ($ in 000s)
	Year
		2018			2017		Change
Cash	$	129		$	105		$	24
Accounts receivable		319			221			98
Inventory		326			420			(94	)
Prepaid insurance		71			83			(12	)
Accounts payable		205			122			83
Salaries payable		112			98			14
Deferred income tax liability		70			57			13
Bond discount		180			205			(25	)

2. Prepare the cash flows from operating activities section of the statement of cash flows for Parnell Company using the indirect method.

Answer 1

Answer-

PARNELL COMPANY
STATEMENT OF CASH FLOWS PARTIAL (USING INDIRECT METHOD)
FOR THE YEAR ENDED DECEMBER 31,2018
Particulars		Amount
		($ in 000s)
Cash flow from operating activities
Net Income		80
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation		118
Loss on sale of machinery		13
Amortization of bond discount		25
Gain on sale of building		-11
Change in operating assets & liabilities
Increase in accounts receivable		-98
Decrease in inventories		94
Decrease in prepaid insurance		12
Increase in accounts payable		83
Increase in salaries payable		14
Increase in deferred tax liability		13
Net cash flow from operating activities		343