Question

1. Net income was $60,100. 2. Equipment (cost $21,770 and accumulated depreciation $9,770) was sold for $11,770. 3. Depreciation expense was $5,770 on the building and $10,770 on equipment. 4. Patent amortization was $2,500. 5. Current assets other than cash increased by $29,000. Current liabilities increased by $14,770. 6. An addition to the building was completed at a cost of $28,770. 7. A long-term investment in stock was purchased for $16,000. 8. Bonds payable of $52,190 were issued. 9. Cash dividends of $30,000 were declared and paid. 10. Treasury stock was purchased at a cost of $11,000. Prepare a statement of cash flows for 2020.

Answer 1

Answer:

Statement of Cash Flows for the year ended December 31, 2020:

Operating activities:

Operating cash flow                           $79,140

Increase /Decrease in working capital:

Increase in current assets               ($29,000)

Decrease in current liabilities           ($14,770)

Net cash flow from operations            $35,370

Financing activities:

Bonds Payable issued        $52,190

Cash dividends                   (30,000)

Treasury stock purchased  (11,000)

Net cash flow from financing activities $11,190

Investing activities:

Sale of Equipment  $11,770

Long-term investment

  in stock                (16,000)

Net cash flow from investing activities (4,230)

Net cash flows                                    $42,330

Explanation:

a) Data and Calculations:

Net income = $60,100

Sale of Equipment = $11,770

Increase in current assets = $29,000

Decrease in current liabilities = $14,770

Building addition = $28,770

Long-term investment in stock = $16,000

Bonds Payable issued $52,190

Cash dividends = $30,000

Treasury stock purchased = $11,000

b) Adjustment of net income with non-cash flows:

Net Income $60,100

add depreciation:

Building          5,770

Equipment    10,770

Amortization 2,500

Operating cash

 flow          $79,140