Question

Problem 23-07 b-c (Part Level Submission)

Bramble Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company. The comparative balance sheet and income statement for Bramble as of May 31, 2020, are as follows. The company is preparing its statement of cash flows.

BRAMBLE COMPANY COMPARATIVE BALANCE SHEET AS OF MAY 31
		2020		2019
Current assets
Cash		$28,500		$19,900
Accounts receivable		75,700		57,400
Inventory		221,400		251,800
Prepaid expenses		8,900		6,900
Total current assets		334,500		336,000
Plant assets
Plant assets		604,900		501,500
Less: Accumulated depreciation—plant assets		150,000		124,000
Net plant assets		454,900		377,500
Total assets		$789,400		$713,500
Current liabilities
Accounts payable		$121,800		$115,600
Salaries and wages payable		47,500		71,300
Interest payable		27,000		24,700
Total current liabilities		196,300		211,600
Long-term debt
Bonds payable		70,000		100,000
Total liabilities		266,300		311,600
Stockholders’ equity
Common stock, $10 par		370,000		280,000
Retained earnings		153,100		121,900
Total stockholders’ equity		523,100		401,900
Total liabilities and stockholders’ equity		$789,400		$713,500

BRAMBLE COMPANY INCOME STATEMENT FOR THE YEAR ENDED MAY 31, 2020
Sales revenue		$1,251,600
Cost of goods sold		722,300
Gross profit		529,300
Expenses
Salaries and wages expense		253,900
Interest expense		74,800
Depreciation expense		26,000
Other expenses		8,200
Total expenses		362,900
Operating income		166,400
Income tax expense		43,000
Net income		$123,400

The following is additional information concerning Bramble’s transactions during the year ended May 31, 2020.

1.		All sales during the year were made on account.
2.		All merchandise was purchased on account, comprising the total accounts payable account.
3.		Plant assets costing $103,400 were purchased by paying $33,400 in cash and issuing 7,000 shares of stock.
4.		The “other expenses” are related to prepaid items.
5.		All income taxes incurred during the year were paid during the year.
6.		In order to supplement its cash, Bramble issued 2,000 shares of common stock at par value.
7.		Cash dividends of $92,200 were declared and paid at the end of the fiscal year.

Using the indirect method, calculate only the net cash flow from operating activities for Bramble Company for the year ended May 31, 2020. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1

STATEMENT OF CASH FLOWS [INDIRECT METHOD]
Cash flows from operating activities:
Net income		$   1,23,400
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation	$      26,000
Decrease in inventory	$      30,400
Increase in receivables	$     -18,300
Increase in prepaid expenses	$       -2,000
Increase in accounts payable	$ 6,200
Decrease in salaries and wages payble	$     -23,800
Increase in interest payable	$ 2,300	$      20,800
Net cash flow from operating activities		$   1,44,200