Question

The following is a condensed version of the comparative balance sheets for Sheffield Corporation for the last two years at December 31.
2020 2019
Cash $265,500 $117,000
Accounts receivable 270,000 277,500
Investments 78,0001 11,000
Equipment 447,000 360,000
Accumulated Depreciation-Equipment (159,000) (133,500)
Current liabilities 201,000 226,500
Common stock 240,000 240,000
Retained earnings 460,500 265,500

Additional information:

a. Net income for 2022 was $55,800.
b. Depreciation expense was $20,400.
c.Cash dividends of $23,400 were declared and paid.
d. Bonds payable amounting to $30,000 were redeemed for cash $30,000.
e. Common stock was issued for $25,200 cash.
f. No equipment was sold during 2022.
g. Land was sold for its book value.

Required:
Prepare a statement of cash flows for 2020 using the indirect method.

Answer 1

Answer:

Sheffield Corporation

Statement of Cash Flows

For the year ended December 31, 2020

Net Income                        $55,800

Non-cash expense:

Depreciation                        20,400

Net Cash from operation $35,400

Working capital changes:

Accounts receivable             7,500

Current liabilities              (25,500)

Net cash from operating activities       $17,400

Investing activities:

Investments                                            33,000

Financing activities:

Common Stock                 25,200

Bonds payable                 (30,000)

Dividends                         (23,400)       (28,200)

Net cash flows                                     $22,200

Explanation:

a) Data and Calculations:

Sheffield Corporation

Comparative Balance Sheet

For the two years at December 31:

                                    2020               2019           Inflow     / outflow

Cash                        $265,500      $117,000

Accounts receivable 270,000       277,500           $7,500

Investments                78,000           111,000          33,000

Equipment                447,000        360,000          

Accumulated Depreciation

-Equipment            (159,000)        (133,500)

Current liabilities     201,000         226,500                           25,500      

Common stock       240,000         240,000

Retained earnings 460,500         265,500