Question

The following info is available for Johnson Company for the year ended December 31,2017 Beginning cash...

The following info is available for Johnson Company for the year ended December 31,2017

Beginning cash balance $35,000

Accounts payable decrease 3,200

Depreciation expense 76,000

Accounts receivable increase 8,200

Inventory increase 13,000

Net income 269,100

Cash received for sale of land at book value 35,000

Sales revenue 747,000

Cash dividend paid 12,000

Income tax payable increase 4,700

Cash used to purchase building 144,000

Cash used to purchase treasury stock 32,000

Cash received from issuing bonds 206,000

Prepare a statement of cash flows using the indirect method

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Solution

Johnson Company
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities:
Net income $   269,100.00
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense $   76,000.00
Accounts payable decrease $    (3,200.00)
Accounts receivable increase $    (8,200.00)
Inventory increase $ (13,000.00)
Income tax payable increase $     4,700.00
$    56,300.00
Net cash from Operating Activities $   325,400.00
Cash flows from investing activities:
Cash received for sale of land $   35,000.00
Cash used to purchase building $(144,000.00)
Net cash from Investing Activities $ (109,000.00)
Cash flows from financing activities:
Cash used to purchase treasury stock $ (32,000.00)
Cash received from issuing bonds $ 206,000.00
Dividends paid $ (12,000.00)
Net cash from Financing Activities $   162,000.00
Net change in cash during the year $   378,400.00
Add: Beginning cash balance $    35,000.00
Ending cash balance $   413,400.00

.General notes for cash flow
Cash is increased when Current liability increase or Current asset Decrease.
Cash is Decreased when Current liability Decrease or Current asset Increase.
Depreciation or loss on sale of any asset is a non cash expense hence it will be added to net income to get operating cash
Profit on sale of asset or investment is a non cash profit and hence will be deducted from operating income.

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