Chapter 16, Problem 4BPSB

To determine

Concept Introduction:

Cash Flow statement:

The Cash flow statement shows the movement of cash during a particular period. The Cash flows are categorized into three categories as follows:

• Cash flows from operating activities
• Cash Flows from investing activities
• Cash flows from financing activities

(Note: Cash flows from operating activities can be prepared using direct or indirect method)

To Prepare:

The Cash Flow statement using the indirect method and Analysis of changes

Answer to Problem 4BPSB

The Cash Flow statement using the indirect method and Analysis of changes is as follows:

GAZELLE CORPORATION
Cash Flow Statements
for the year ended Dec. 31, 2017
Cash flows from operating activities:
Net income	$ 158,100
Add: Depreciation Expense	$ 38,600
Add: Loss on sale of equipment	$ 2,100
Add: Decrease in Accounts receivables (80750-77100)	$ 3,650
Add: Decrease in Inventory (250700-240600)	$ 10,100
Add: Decrease in Prepaid Expense (17000-15100)	$ 1,900
Less: Decrease in Accounts Payable (102000-17750)	$ (84,250)
Cash provided by operating activities		$ 130,200
Cash Flows from investing activities:
Cash Received from Sale of Equipment	$ 26,050
Cash paid for Purchase of Equipment	$ (43,250)
Cash used by investing activities:		$ (17,200)
Cash flows from financing activities:
Cash Receipts from Short term notes payable	$ 5,000
Cash Paid to reduce long term notes payable	$ (47,500)
Cash Receipts from Issuance of Stock (3000 Shares*$15)	$ 45,000
Cash Dividends paid	$ (53,600)
Cash used by financing activities:		$ (51,100)
Net Cash Flows		$ 61,900
Add: Beginning Balance of Cash		$ 61,550
Ending Balance of Cash		$ 123,450

Explanation of Solution

The Cash Flow statement using the indirect method and Analysis of changes is explained as follows:

GAZELLE CORPORATION
Cash Flow Statements
for the year ended Dec. 31, 2017
Cash flows from operating activities:
Net income	$ 158,100
Add: Depreciation Expense	$ 38,600
Add: Loss on sale of equipment	$ 2,100
Add: Decrease in Accounts receivables (80750-77100)	$ 3,650
Add: Decrease in Inventory (250700-240600)	$ 10,100
Add: Decrease in Prepaid Expense (17000-15100)	$ 1,900
Less: Decrease in Accounts Payable (102000-17750)	$ (84,250)
Cash provided by operating activities		$ 130,200
Cash Flows from investing activities:
Cash Received from Sale of Equipment	$ 26,050
Cash paid for Purchase of Equipment	$ (43,250)
Cash used by investing activities:		$ (17,200)
Cash flows from financing activities:
Cash Receipts from Short term notes payable	$ 5,000
Cash Paid to reduce long term notes payable	$ (47,500)
Cash Receipts from Issuance of Stock (3000 Shares*$15)	$ 45,000
Cash Dividends paid	$ (53,600)
Cash used by financing activities:		$ (51,100)
Net Cash Flows		$ 61,900
Add: Beginning Balance of Cash		$ 61,550
Ending Balance of Cash		$ 123,450