Answer:
See below
Explanation:
Statement of cash flows for the year ended December 31, 2020 using the indirect method.
Cash flow from operating activities:
Net loss = $12,000
Adjustment to reconcile net loss with cash flows from operating activities:
Depreciation = ($20,000 + $10,000 - $13,000) = $7,000
Loss on sale of land = $2,000
Increase in accounts receivable = ($20,000)
Increase in prepaid expense = ($5,000)
Increase in accounts payable = $6,000
Net cash used in operating activities = ($12,000)
Cash flow from investing activities
Sale of land = ($40,000 - $18,000 - $2,000) = $20,000
Sale of equipment = $5,000
Net cash generated by investing activities = $25,000
Cash flow from financing activities
Retirement of bond = ($12,000)
Proceeds from issuance of bonds = $20,000
Net cash used by financing activities = $8,000
Net increase in cash = $6,000
Add: beginning cash balance = $31,000
Ending cash balance = $37,000
Workings
• Calculation of depreciation
The accumulated depreciation at the end of the year 2020 = ($20,000)
Hence;
Accumulated depreciation at the end of the year 2020 = ($13,000)
Increase in accumulated depreciation during 2020 = $20,000 - $13,000 = $7,000
Add: accumulated depreciation on equipment sold during 2017 = $10,000
Total depreciation expense for 2020 = $7,000 + $10,000 = $17,000
• Calculation of proceeds from sale of land:
Cost of land = $40,000 - $18,000 = $22,000
Loss on sale of land = $2,000
Therefore,
Proceeds from sale of land = cost of land sold - loss on sale of land
= $22,000 - $2,000
= $20,000
• Calculation of issuance of bonds payable during 2020
The bonds payable at the end of year 2019 = $19,000
Hence,
Bonds payable at the end of year 2020 = $27,000
Retirement of bonds during year 2020 = $12,000
Therefore,
Bonds issued during 2020 = $27,000 + $12,000 - $19,000 = $20,000
