Question

The following are accounting items taken from the records of Sterling Company for 2016:

Payment of dividends	$24,000
Decrease in accounts payable	$19,000
Decrease in accounts receivable	$21,000
Increase in inventories	$ 6,000
Increase in salaries payable	$18,000
Net income	$42,000
Payment for purchase of land and buildings	$60,000
Issuance of ten-year bonds payable at par	$20,000
Depreciation expense	$10,000
Proceeds from sale of patent rights	$27,000

Required:

Prepare the statement of cash flows for Sterling Company for 2016 using the indirect method.

Answer 1

Statement of Cash flow

Cash flow from operating activities
Net income	42000
Depreciation expense	10000
Decrease in accounts payable	-19000
Decrease in account receivable	21000
Increase in inventories	-6000
Increase in Salaries payable	18000
Net Cash flow from operating activities		66000
Cash flow from Investing activities
Payment for purchase of land and buildings	-60000
Proceeds from sale of patent rights	27000
Net Cash used investing activities		-33000
Cash flow from financing activities
Payment of dividend	-24000
Issuance of ten-year bonds payable at par	20000
Net Cash used financing activities		-4000
Net Cash flow		29000