Gems Co. uses the indirect method to prepare its statement of cash flows. The following comparative statement of financial position for 2021 and 2022 are presented: At December 31 2022 2021 Property, Plant and Equipment (PPE) $1 260 000 $1 050 000 Accumulated depreciation (450 000) (375 000) Patent 153 000 174 000 Prepaid expenses 18 000 27 000 Inventory 150 000 180 000 Accounts receivable 159 000 117 000 Cash 297 000 153 000 $1 587 000 $1 326 000 Accounts payable $ 153 000 $ 168 000 Accrued liabilities 60 000 42 000 Mortgage payable ---- 450 000 Share capital-Preference 645 000 ----- Share capital-Ordinary 600 000 600 000 Retained earnings 129 000 66 000 $1 587 000 $1 326 000 Additional Information: 1. The Accumulated Depreciation account has been credited only for the depreciation expense for the period. 2. The Retained Earnings account has been charged for dividends of $138 000 and credited for the net income for the year. The statement of profit or loss for 2022 was as follows: Sales $1 980 000 Cost of sales 1 089 000 Gross profit 891 000 Operating expenses 690 000 Net income $ 201 000 Required: Prepare a statement of cash flows (indirect method) for Gems Co. for the year ended December 31, 2022. Gems Co. Statement of Cash Flows (Indirect Method) For the Year Ended December 31, 2022 Cash flows from operating activities $ $ Net income Answer 1 Question 4 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Answer 2 Question 4 Answer 3 Question 4 Answer 4 Question 4 Accounts receivable Answer 5 Question 4 Answer 6 Question 4 Inventory Answer 7 Question 4 Answer 8 Question 4 Prepaid expenses Answer 9 Question 4 Answer 10 Question 4 Accounts payable Answer 11 Question 4 Answer 12 Question 4 Accrued liabilities Answer 13 Question 4 Answer 14 Question 4 Answer 15 Question 4 Net cash Answer 16 Question 4 by operating activities Answer 17 Question 4 Cash flows from investing activities Answer 18 Question 4 of PPE Answer 19 Question 4 Net Cash Answer 20 Question 4 by investing activities Answer 21 Question 4 Cash flows from financing activities Answer 22 Question 4 of cash dividend Answer 23 Question 4 Answer 24 Question 4 of mortgage payable Answer 25 Question 4 Answer 26 Question 4 of preference shares Answer 27 Question 4 Net cash Answer 28 Question 4 by financing activities Answer 29 Question 4 Net Answer 30 Question 4 in cash Answer 31 Question 4 Cash, January 1, 2022 Answer 32 Question 4 Cash, December 31, 2022
Gems Co. uses the indirect method to prepare its statement of
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At December 31 |
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2022 |
2021 |
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Property, Plant and Equipment (PPE) |
$1 260 000 |
$1 050 000 |
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(450 000) |
(375 000) |
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Patent |
153 000 |
174 000 |
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Prepaid expenses |
18 000 |
27 000 |
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Inventory |
150 000 |
180 000 |
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159 000 |
117 000 |
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Cash |
297 000 |
153 000 |
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$1 587 000 |
$1 326 000 |
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Accounts payable |
$ 153 000 |
$ 168 000 |
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Accrued liabilities |
60 000 |
42 000 |
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Mortgage payable |
---- |
450 000 |
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Share capital-Preference |
645 000 |
----- |
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Share capital-Ordinary |
600 000 |
600 000 |
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129 000 |
66 000 |
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$1 587 000 |
$1 326 000 |
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Additional Information:
1. The Accumulated Depreciation account has been credited only for the depreciation expense for the period.
2. The Retained Earnings account has been charged for dividends of $138 000 and credited for the net income for the year.
The statement of profit or loss for 2022 was as follows:
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Sales |
$1 980 000 |
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Cost of sales |
1 089 000 |
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Gross profit |
891 000 |
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Operating expenses |
690 000 |
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Net income |
$ 201 000 |
Required:
Prepare a statement of cash flows (indirect method) for Gems Co. for the year ended December 31, 2022.
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Gems Co. |
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Statement of Cash Flows (Indirect Method) |
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For the Year Ended December 31, 2022 |
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Cash flows from operating activities |
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$ |
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Net income |
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Answer 1 Question 4 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation |
Answer 2 Question 4 |
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Answer 3 Question 4 |
Answer 4 Question 4 |
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Accounts receivable Answer 5 Question 4 |
Answer 6 Question 4 |
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Inventory Answer 7 Question 4 |
Answer 8 Question 4 |
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Prepaid expenses Answer 9 Question 4 |
Answer 10 Question 4 |
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Accounts payable Answer 11 Question 4 |
Answer 12 Question 4 |
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Accrued liabilities Answer 13 Question 4 |
Answer 14 Question 4 |
Answer 15 Question 4 |
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Net cash Answer 16 Question 4 by operating activities |
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Answer 17 Question 4 |
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Cash flows from investing activities |
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Answer 18 Question 4 of PPE |
Answer 19 Question 4 |
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Net Cash Answer 20 Question 4 by investing activities |
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Answer 21 Question 4 |
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Cash flows from financing activities |
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Answer 22 Question 4 of cash dividend |
Answer 23 Question 4 |
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Answer 24 Question 4 of mortgage payable |
Answer 25 Question 4 |
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Answer 26 Question 4 of |
Answer 27 Question 4 |
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Net cash Answer 28 Question 4 by financing activities |
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Answer 29 Question 4 |
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Net Answer 30 Question 4 in cash |
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Answer 31 Question 4 |
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Cash, January 1, 2022 |
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Answer 32 Question 4 |
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Cash, December 31, 2022 |
A Statement of Cash Flow is a financial statement that includes the inflow and outflow of cash flow. The movements of cash take place due to three significant activities operating, investing and financing activities.
This statement shows the actual sources and usage of cash.
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