Additional data obtained from an examination of the accounts

Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows: The investments were sold for $175,000 cash. Equipment and land were acquired for cash. There were no disposals of equipment during the year. The common stock was issued for cash. There was a $500,000 credit to Retained Earnings for net income. There was a $90,000 debit to Retained Earnings for cash dividends declared.

LIVERS INC.

Statement of Cash Flows

For the Year Ended December 31, 20Y3

Cash flows from operating activities:

Net income

Adjustments to reconcile net income to net cash

flow from operating activities:

Depreciation

100,000

Loss on inventory write down and fixed assets

Gain on sale of investments

Changes in current operating assets and liabilities:

Increase in accounts receivable

(50,000)

Increase in inventories

(20,000)

Increase in accounts payable

40,000

Decrease in accrued expenses payable

(5,000)

Net cash flow from operating activities

Cash flows from investing activities:

Cash received from sale of investments

Cash paid for purchase of land

(500,000)

Cash paid for purchase of equipment

(200,000)

Net cash flow used for investing activities

Cash flows from financing activities:

Cash received from sale of common stock

$125,000

Cash paid for dividends

Net cash flow from financing activities

Change in cash

Cash at the beginning of the year

150,000

Cash at the end of the year

$155,000

Solution

LIVERS INC. Statement of Cash Flows (Indirect Method) For the Year ended Dec 31, 20Y3 Cash Flow from opearating activities: Net Income            500,000 Add/(Less) non cash effects on operating activities Depreciation expense - Plant & Equipment         100,000 Gain on Sale of Investment         (75,000) Increase in Accounts Receivables         (50,000) Increase in Inventory         (20,000) Increase in Accounts Payables           40,000 Decrease in Accrued Expenses Payable           (5,000)            (10,000) Net Cash provided by operating activities            490,000 Cash flow from Investing Activities Purchase of Equipment       (200,000) Purchase of Land       (500,000) Sale of Investment         175,000 Net Cash used by Investing activities          (525,000) Cash Flow from Financing Activities Issue of CommoN Stock - $100,000 + $25,000         125,000 Cash dividend paid         (85,000) Net Cash provided by Financing activities              40,000 Net Increase / (Decrease) in Cash                 5,000 Cash balance at the beginning - Dec 31, 20Y2            150,000 Cash balance at the end - Dec 31, 20Y3            155,000 Dividend Payable Particulars Amt Particulars Amt To Cash Dividend (Bal. Fig)                85,000 By Balance b/f                25,000 To Balance C/f                30,000 By Dividends                90,000              115,000              115,000