The comparative balance sheet of Livers Inc. for December 31, 20Y3 and 20Y2, is shown as follows: Dec. 31, 20Y3 Dec. 31, 20Y2 Assets Cash 155,000 150,000 Accounts Receivable (net) 450,000 400,000 Inventories 770,000 750,000 Investments 0 100,000 Land 500,000 0 Equipment 1,400,000 1,200,000 Accumulated Depreciation-equipment (600,000) (500,000) Total Assets 2,675,000 2,100,000 Liabilities and Stockholders’ Equity Accounts Payable 340,000 300,000 Accrued Expenses Payable 45,000 50,000 Dividends payable 30,000 25,000 Common Stock, $4 par 700,000 600,000 Paid-in Capital in Excess of par-Common Stock 200,000 175,000 Retained Earnings 1,360,000 950,000 Total Liabilities and stockholders’ equity 2,675,000 2,100,000 Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows: The investments were sold for $175,000 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 $500,000 credit to Retained Earnings for net income. There was a $90,000 debit to Retained Earnings for cash dividends declared. Instructions Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The comparative balance sheet of Livers Inc. for December 31, 20Y3 and 20Y2, is shown as follows:

	Dec. 31, 20Y3	Dec. 31, 20Y2
Assets
Cash	155,000	150,000
Accounts Receivable (net)	450,000	400,000
Inventories	770,000	750,000
Investments	0	100,000
Land	500,000	0
Equipment	1,400,000	1,200,000
Accumulated Depreciation-equipment	(600,000)	(500,000)
Total Assets	2,675,000	2,100,000
Liabilities and Stockholders’ Equity
Accounts Payable	340,000	300,000
Accrued Expenses Payable	45,000	50,000
Dividends payable	30,000	25,000
Common Stock, $4 par	700,000	600,000
Paid-in Capital in Excess of par-Common Stock	200,000	175,000
Retained Earnings	1,360,000	950,000
Total Liabilities and stockholders’ equity	2,675,000	2,100,000

Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows:

The investments were sold for $175,000 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 $500,000 credit to Retained Earnings for net income.
There was a $90,000 debit to Retained Earnings for cash dividends declared.

Instructions

Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.




Livers Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y3

Cash flows from operating activities:

Net Income	$500,000
Adjustments to reconcile net loss to net cash flow from operating activities:

Depreciation	$100,000
Gain on sale of investments
Changes in current operating assets and liabilities
Increase in accounts receivable
Increase in inventories
Increase in Accounts Payable	$40,000
Decrease in accrued expenses payable
Net cash flow provided by operating activities		$490,000

Cash flows from investing activities:

Cash received from sale of investments	$175,000
Less: Cash paid for purchase of land
Less: Cash paid for purchase of equipment
Net cash flow used for investing activities

Cash flows from financing activities:


Cash received from issuance of common stock	$125,000
Less cash paid for dividends
Net cash flow from financing activities

Net Increase in cash		$5,000
Cash at the beginning of the year		$150,000
Cash at the end of the year		$155,000

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