Question

Use the Rouse Exercise Equipment data in Exercise E14-23. Prepare the company’s statement of cash flows—indirect method—for the year ended December 31, 2018. Assume investments are purchased with cash.

Short answer

Cash inflow from operating activity is $160,000.

Cash outflow from investing activity is $115,000

Cash outflow from financing activity is $44,000

The net cash inflow from all the above activities is $1,000

Step-by-step solution

Cash Flow Statement

A cash flow statement shows the movement of cash in an organization. It is divided into three parts operating, investing, and financing activity

Cash flow statement

Particulars	Amount ($)	Amount ($)
Cash flow from operating activity
Net profit	107,000
Add: Depreciation	54,000
Less: Increase in account receivable	(11,000)
Add: Decrease in inventory	11,000
Add: Increase in account payable	1,000
Less: Decrease in salary payable	(2,000)
Cash flow from operating activity (A)		160,000
Cash flow from investing activity
Acquisition of plant asset	(92,000)
Purchase of investment	(23,000)
Cash flow from investing activity (B)		(115,000)
Cash flow from financing activity
Issue of shares	11,000
Payment of dividend	(47,000)
Payment of note payable	(8,000)
Cash flow from Financing activity (C)		(44,000)
Net Cash flow from all the activities (A+B+C)		1,000
Add: Opening cash balance		16,000
Closing cash balance		17,000