Question

Bonds were retired during 2016 at face value, plant and equipment were acquired for cash, and common stock was issued for cash. Depreciation expense for the year was $35,000. Net income was reported at $26,000.
(1) Prepare a statement of cash flows for 2016 using the indirect method in the Operating Activities section.
(2) Did Chrisman generate sufficient cash from operations to pay for its investing activities

Answer 1

Answer:

Using Indirect Method

1. Cashflow from operating activities    $

Net income                                        26,000

Add: Depreciation                             35,000

Cashflow from operating activities   61,000

2. Chrisman has generated sufficient cashflow from operating activities to pay for its investing activities.

Explanation:

Cashflow from operating activities equals net income plus adjustment for items not involving movement of cash such as depreciation.