Answer and Explanation:
The preparation of the cash flow statement is shown below:
Cash Flow From Operating Activities
Net Income $70,000
Add: Depreciation expenses $20,000
Add: Loss on Sale of Land $7,000
Add: Increase in Accounts Payable $10,000
Less: Increase in accounts receivable -$60,000
Less: Increase in prepaid rent -$10,000
Less: Increase in inventory -$30,000
Cash Flow Provided by Operating Activities $7,000 (A)
Cash Flow From Investing Activities
Purchase of equipment -$220,000
Cash received from the sale of land $3,000
Cash Flow Used by Investing Activities -$217,000 (B)
Cash Flow from Financing Activities
Payment of dividends -$40,000
Repayment of notes payable -$50,000
Issuance of common stock $250,000
Cash Flow Provided by Financing Activities $160,000 (C)
Net Decrease in Cash -$50,000 (A + B + C)
Add: Cash at the beginning of the period $95,000
Cash at the end of the period $45,000
We considered the all three activities of the cash flow statements
