Answer and Explanation:
The preparation of the cash flows statement is presented below:
Cash flow from operating activities
Net income $78,300
Adjustments in net income
Add: Amortization of patents $5,000
Add: Depreciation expense $19,000
Less: Increase in prepaid expense ($700)
($7,500 - $6,800)
Less: Increase in accounts receivable ($20,600)
($102,000 - $80,000) - ($4,500 - $3,100)
Decrease in Inventory $15,000
($160,000 - $175,000)
Increase in accounts payable $6,000
($90,000 - $84,000)
Decrease in accrued liabilities ($9,000) $14,700
($54,000 - $63,000)
Cash flow from operating activities $93,000
Cash flow from Investing activities
Sales of patents 10,000
($20,000 - $35,000) - $5,000)
Land purchased ($40,000
)
($100,000 - $60,000)
Building purchased ($50,000)
($294,000 - $244,000)
Cash flow from Investing activities ($80,000)
Cash flow from Financing activities
Bonds purchased $65,000
($125,000 - $60,000)
Common stock
Additional paid in capital
Dividend paid ($35,000)
Treasury stock ($7,000)
($15,000 - $8,000)
Net Cash flow from Financing activities $23,000
Net Cash flow $36,000
($93,000 - $80,000 + $23,000)
Add Beginning cash and cash equivalent $27,000
Ending cash and cash equivalent $63,000
($36,000 + $27,000)
Therefore, we represent the negative value is cash outflow while the positive value is cash inflow.
