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

Short answer

Answer

Cash balance at the end of the year is $75,000.

Step-by-step solution

Cash flow from operating activities

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

Statement of cash flows- Indirect method

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