16
Additional data obtained from an examination of the accounts in the ledger for 2014 are as
follows:
The investments were sold for $210,000 cash.
Equipment and land were acquired for cash.
There were no disposals of equipment during the year.
The common stock was issued for cash.
There was a $190,280 credit to Retained Earnings for net income.
There was a $72,000 debit to Retained Earnings for cash dividends declared.
Required:
Prepare a statement of cash flows, using the indirect method of presenting cash flows from
operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in
cash and for any adjustments, if required.
Prepare a statement of cash flows, using the indirect method of presenting cash flows from
operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in
cash and for any adjustments, if required.
Solution
Net Income 1,90,280 Add Depreciation 13,800 Working capital changes Inventories -18,480
Acc. Receivable -14,160 Acc payable 14,640 Accrued Exp -7,800 Cash from operating activities
1,78,280 Investing activities Equipment purchases -1,14,000 Investment sold 2,00,000 Land
purchases -2,46,000 Cash from Investing activities -1,60,000 Financing Activities Dividend paid

-68,400 Capital 80,000 Retained earnings Cash from financing activities 11,600 Net cash (
Operating+Investing+financing) 29,880 Opening Cash 439440 Closing cash 4,69,320