Question

The comparative balance sheet of Navaria Inc. for December 31, 20Y3 and 20Y2, is as follows:

	Dec. 31, 20Y3			Dec. 31, 20Y2
Assets
Cash	$ 226,460			$ 212,720
Accounts receivable (net)	82,680			75,850
Inventories	233,010			224,050
Investments	0			87,180
Land	119,440			0
Equipment	254,650			200,510
Accumulated depreciation-equipment	(60,600)			(54,100)
Total assets	$855,640			$746,210
Liabilities and Stockholders' Equity
Accounts payable	$ 154,350			$ 147,000
Accrued expenses payable	15,520			19,400
Dividends payable	8,400			6,700
Common stock, $1 par	45,600			35,070
Paid-in capital: Excess of issue price over par-common stock	173,500			101,480
Retained earnings	458,270			436,560
Total liabilities and stockholders’ equity	$855,640			$746,210

The income statement for the year ended December 31, 20Y3, is as follows:

Sales		$1,464,620
Cost of merchandise sold		900,740
Gross profit		$ 563,880
Operating expenses:
Depreciation expense	$ 6,500
Other operating expenses	477,470
Total operating expenses		483,970
Operating income		$ 79,910
Other income:
Gain on sale of investments		14,600
Income before income tax		$ 94,510
Income tax expense		37,800
Net income		$ 56,710

Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows:

1. The investments were sold for $101,780 cash.
2. Equipment and land were acquired for cash.
3. There were no disposals of equipment during the year.
4. The common stock was issued for cash.
5. There was a $35,000 debit to Retained Earnings for cash dividends declared.

Required:

Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.

Answer 1

Cash Flow Statement
Particulars				Amount
Cash Flow from operating activity
Cash received from customer- W.N				$1,457,790
Cash payment to supplier- W.N				($902,350)
operating expenses paid- W.N				($481,350)
Income tax paid				($37,800)
net cash flow from operating activities (a)				$36,290
Cash flow from investing activities
Purchase of equipment(254650-200150)				($54,140)
sale of investment				$101,780
purchase of land(119440-0)				($119,440)
Net cash flow from investing activities (b)				($71,800)
Cash flow from financing activity
Issue of common stock(45600-35070)				$10,530
Paid in Capital in excess of issue price(173500-101480)				$72,020
dividend paid				($33,300)
Net cash flow from financing activity ( c)				$49,250
net cash flow (a)+(b)+( c)				$13,740
cash at the beginning				$212,720
cash at the end				$226,460
Working Note
Cash receive from customer
Sale				$1,464,620
less: Increase in accounts receivable				$6,830
Cash receive from customer				$1,457,790
Cash paid to supplier
cost of goods sold				$900,740
Less:Increase in accounts payable				$7,350
Add: increase in inventory				$8,960
				$902,350
Operating expenses
Other operating expenses				$477,470
Add: decrease in accrued exp				$3,880
				$481,350
		Dividend Payable
Dividend Declared during the year				$35,000
Less increase in dividend Payable				($1,700)
Cash Payment for Dividend				$33,300