Question

ABC Company has completed the basic format to be used in preparing the statement of cash flows (indirect method). Listed below in random order are line items to be included in the statement of cash flows.
Purchase of equipment $2,210
Decrease in inventory 253
Increase in prepaid rent 75
Payment of dividends 360
Depreciation expense 184
Increase in accounts receivable 530
Increase in accounts payable 160
Gain on sale of land 136
Net income 1,878
Repayment of notes payable 493
Cash received from the sale of land 67
Issuance of common stock 2,440
Required:
1. What is the net cash provided by operating activities?
a. $926 Inflow.
b. $1,198 Inflow.
c. $420 Inflow.
d. $324 Inflow.
2. What is the net cash provided by Investing activities?
a. $2,143 outflow.
b. $2,279 outflow.
c. $1,959 outflow.
d. $2,095 outflow.
3. What is the net cash flow by financing activities?
a. $1,587 Inflow.
b. $1.947 Inflow.
c. $2,080 Inflow.
d. $2,440 Inflow.

Answer 1

Answer:

1. b. $1,198 Inflow

2. a. $2,143 outflow

3. a. $1,587 Inflow.

Explanation:

Determination of net cash provided by operating activities

                                                          $

Cash flow from Operating Activities

Net income                                                        1,878

Adjust for :

Depreciation expense                                        184

Decrease in inventory                                        253

Increase in prepaid rent                                     (75)

Increase in accounts receivable                      (530)

Increase in accounts payable                            160

Gain on sale of land                                          (136)

Net cash provided by operating activities      1,734

Determination of net cash provided by Investing activities

                                                                   $

Cash flow from Investing Activities

Purchase of equipment                             (2,210)

Cash received from the sale of land              67

Net cash provided by Investing activities (2,143)

Determination of net cash flow by financing activities

                                                                     $

Cash flow from Financing Activities

Payment of dividends                              (360)

Issuance of common stock                    2,440

Repayment of notes payable                  (493)

Net cash flow by financing activities      1,587