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3 November, 08:39

The following information is available for Larkspur Corporation for the year ended December 31, 2022.

Beginning cash balance $40,000

Accounts payable decrease 3,200

Depreciation expense 84,000

Accounts receivable increase 9,400

Inventory increase 12,300

Net income 257,000

Cash received for sale of land at book value 40,000

Sales revenue 745,000

Cash dividends paid 11,900

Income tax payable increase 4,000

Cash used to purchase building 140,500

Cash used to purchase treasury stock 30,100

Cash received from issuing bonds 269,000

Prepare a statement of cash flows using the indirect method.

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  1. 3 November, 08:49
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    The statement of cash flows using the indirect method would be the following:

    Cash flow statement for year ended December 31, 2022:

    Description Amount Amount

    Operating activities:

    Net income $257,000

    Adjustments to reconcile net income to net cash from operating activities

    Add: Depreciation expense $84,000

    Less: Decrease in accounts payable ($3,200)

    Less: Increase in accounts receivable ($9,400)

    Less: Increase in inventory ($12,300)

    Add: Income tax payable increase $4,000

    Net cash flows from operating activities $320,100

    Investing activities:

    Buildings purchased ($140,500)

    Cash received from sale of land $40,000

    Net cash flows from investing activities ($100,500)

    Financing activities:

    Dividends paid ($11,900)

    Treasury stock purchased ($30,100)

    Proceeds from bond issue $269,000

    Net cash flows from financing activities $227,000

    Net change in cash $446,600

    Beginning cash balance $40,000

    Ending cash balance $486,600

    Explanation:

    The statement of cash flows using the indirect method would be the following:

    Cash flow statement for year ended December 31, 2022:

    Description Amount Amount

    Operating activities:

    Net income $257,000

    Adjustments to reconcile net income to net cash from operating activities

    Add: Depreciation expense $84,000

    Less: Decrease in accounts payable ($3,200)

    Less: Increase in accounts receivable ($9,400)

    Less: Increase in inventory ($12,300)

    Add: Income tax payable increase $4,000

    Net cash flows from operating activities $320,100

    Investing activities:

    Buildings purchased ($140,500)

    Cash received from sale of land $40,000

    Net cash flows from investing activities ($100,500)

    Financing activities:

    Dividends paid ($11,900)

    Treasury stock purchased ($30,100)

    Proceeds from bond issue $269,000

    Net cash flows from financing activities $227,000

    Net change in cash $446,600

    Beginning cash balance $40,000

    Ending cash balance $486,600
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