Q37PGA
Question
Preparing the statement of cash flows—direct method Use the Rolling Hills, Inc. data from Problem P14-34A. Requirements
1. Prepare the 2018 statement of cash flows by the direct method.
2. How will what you learned in this problem help you evaluate an investment?
Step-by-Step Solution
Verified- Net cash from operating activities is $125,100.
- Value of new investment during the year is $23,600
| Rolling Hills Inc. Statement of Cash Flows For the year ended December 31, 2018 | |
Cash Flows From Operating Activities: |
|
Receipts: |
|
From customers ($25,400+$440,000-$26,500) | $438,900 |
Interest revenue | $8,700 |
Payments: |
|
To accounts payable | ($193,800) |
To employees | ($77,400) |
To other operating expenses | ($10,200) |
For interest expense | ($21,100) |
To income tax | ($20,000) |
Net cash provided/ (used) in operating activities | $125,100 |
Cash Flows From Investing Activities: |
|
Purchase of land | ($23,600) |
Net cash provided/ (used) in investing activities | ($23,600) |
Cash Flows From Financing Activities: |
|
Issuance of common stock | $24,400 |
Payment of notes payable | ($50,100) |
Dividend paid | ($64,600) |
Net cash provided/ (used) in financing activities | ($90,300) |
Net increase/(Decrease) in cash | $11,200 |
Cash Balance, December 31, 2017 | $15,700 |
Cash Balance, December 31, 2018 | $26,900 |
| Rolling Hills Inc. Statement of Cash Flows (Partial) For the year ended December 31, 2018 | |
Non-cash Investing and financing activities |
|
Acquisition of land by issuing long-term notes payable | $21,100 |
Total Non-cash Investing and financing activities | $21,100 |
The value of the purchase of the plant is determined by taking the opening balance i.e., $114,650 and subtracting the cost of the sold plant i.e., $13410 then comparing it to the closing balance of the plant i.e., $124840. Therefore, the difference now will be the purchase of the plant i.e., $23600.