Question

1. Dauber Corporation's comparative balance sheet and income statement for last year appear below:

Comparative Balance Sheet
	Ending Balance			Beginning Balance
Cash and cash equivalents	$	64,000			$	39,000
Accounts receivable		57,000				44,000
Inventory		58,000				70,000
Prepaid expenses		18,000				10,000
Long-term investments		290,000				230,000
Property, plant, and equipment		520,000				520,000
Less accumulated depreciation		390,000				358,000
Total assets	$	617,000			$	555,000
Accounts payable	$	14,000			$	38,000
Accrued liabilities		35,000				17,000
Income taxes payable		69,000				40,000
Bonds payable		160,000				180,000
Common stock		140,000				110,000
Retained earnings		199,000				170,000
Total liabilities and stockholders' equity	$	617,000			$	555,000

Income Statement
Sales	$	580,000
Cost of goods sold		250,000
Gross margin		330,000
Selling and administrative expense		210,000
Net operating income		120,000
Income taxes		36,000
Net income	$	84,000

The company declared and paid a cash dividend of $55,000 during the year. It did not sell any long-term investments, issue any bonds payable, or repurchase any of its own common stock.

Required:

a. Construct in good form the operating activities section of the company's statement of cash flows for the year.

b. Construct in good form the investing activities section of the company's statement of cash flows for the year.

c. Construct in good form the financing activities section of the company's statement of cash flows for the year.

Answer 1

                                            

Particulars	$	$
Cash flow from Operating Activities
Net income	84,000
Add: Adjustments to reconcile net income to net cash provided by operating activities
Depreciation on property, plant and equipment	32,000
Accounts receivable	- 13,000
Inventory	12,000
Prepaid expenses	-8,000
Accounts payable	- 24,000
Income tax payable	29,000
Accrued liabilities	18,000
Net cash provided by Operating Activities		130,000
Cash flow from Investing Activities
Purchase of investments	- 60,000
Net cash used in Investing Activities		- 60,000
Cash flow from Financing Activities
Issue of common stock	30,000
Redemption of Bonds	- 20,000
Dividend paid	- 55,000
Net cash used in Financing Activities		- 45,000
Net increase in Cash and Cash Equivalents(I +II +III)		25,000
Add: Cash in the beginning of the period		39,000
Cash at the end of the period		64,000

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