Sales revenue $6,800 Cost of goods sold 4,700 Gross margin 2,100 Selling and administrative expenses 910 Income from operations 1,190 Other revenues and gains Gain on sale of investments 80 Income before tax 1,270 Income tax expense 550 Net income 720 Cash dividends 260 Income retained in business $460 Additional information: During the year, $70 of common stock was issued in exchange for plant assets. No plant assets were sold in 2017. Prepare a statement of cash flows using the indirect method.

Question

Jeremiah Mckinney

Business

6 December, 06:05

Sales revenue $6,800 Cost of goods sold 4,700 Gross margin 2,100 Selling and administrative expenses 910 Income from operations 1,190 Other revenues and gains Gain on sale of investments 80 Income before tax 1,270 Income tax expense 550 Net income 720 Cash dividends 260 Income retained in business $460 Additional information: During the year, $70 of common stock was issued in exchange for plant assets. No plant assets were sold in 2017. Prepare a statement of cash flows using the indirect method.

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Answers (1)

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Dayton Livingston · Answer 1

Cash flows by the indirect method, start from the net income to which all extraordinary costs and expenses are reversed to know the operating profit, then the investments made are added and the financing sources are shown to reach the final change in cash flow

Explanation:

Statement of cash flows ($)

Net income 720

+ Other revenues and gains Gain on sale of investments 80

+ Income tax expense 550

Cashflows from operation activities 1350

+ Plants assets 70

Cashflows from investing activities 70

- Cash dividends 260

- Common Stocks

Cashflows of the year = 1090