Q2TI
Question
Question: Owl, Inc.’s accountants have assembled the following data for the year ended December 31, 2018: Cash receipt from sale of equipment \( 20,000
Depreciation expense 12,000
Cash payment of dividends 4,000
Cash receipt from issuance of common stock 12,000
Net income 30,000
Cash purchase of land 25,000
Increase in current liabilities 10,000
Decrease in current assets other than cash 8,000
Prepare Owl’s statement of cash flows using the indirect method for the year ended December 31, 2018. Assume beginning and ending Cash are \)12,000 and $75,000 respectively
Step-by-Step Solution
VerifiedAnswer
Cash balance at the end of the year is $75,000.
Cash flows from operating activities | Amount | Amount |
Net Income |
| $30,000 |
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: |
|
|
Depreciation expense | $12,000 |
|
Increase in current liabilities | $10,000 |
|
Decrease in current assets other than cash | $8,000 | $30,000 |
Net cash provided by operating activities |
| $60,000 |
Owl’s Inc. Statement of cash flows Year ended 31st December, 2018 | ||
Cash flows from operating activities | Amount | Amount |
Net Income |
| $30,000 |
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: |
|
|
Depreciation expense | $12,000 |
|
Increase in current liabilities | $10,000 |
|
Decrease in current assets other than cash | $8,000 | $30,000 |
Net cash provided by operating activities |
| $60,000 |
|
|
|
Cash flows from investing activities |
|
|
Cash receipt from sale of equipment | $20,000 |
|
Cash purchase of land | ($25,000) |
|
Net cash used for investing activities |
| ($5,000) |
|
|
|
Cash flows from financing activities |
|
|
Cash receipt from issuance of common stock | $12,000 |
|
Cash payment of dividends | ($4,000) |
|
Net cash provided by financing activities |
| $8,000 |
Net Increase/(Decrease) in cash |
| $63,000 |
Cash balance, December 31, 2017 |
| $12,000 |
Cash balance, December 31, 2018 |
| $75,000 |