Question

The comparative balance sheets for Splish Brothers Company appear below: SPLISH BROTHERS COMPANY Comparative Balance Sheet Assets Dec. 31, 2022 Dec. 31, 2021 Cash $46,700 $13,000 Accounts receivable 17,000 14,000 Inventory 37,000 19,600 Prepaid insurance 8,500 10,000 Stock investments -0- 15,500 Equipment 60,000 30,000 Accumulated depreciation-equipment (15,100 ) (12,500 ) Total assets $154,100 $89,600 Liabilities and Stockholder's Equity Accounts payable $34,500 $8,300 Bonds payable 35,200 45,500 Common stock 35,500 20,900 Retained earnings 48,900 14,900 Total liabilities and stockholder's equity $154,100 $89,600 Additional information: 1. Net income for the year ending December 31, 2022, was $44,000. 2. Cash dividends of $11,700 were declared and paid during the year. 3. Stock investments on balance sheet that had a book value of $17,200 were sold for $12,400. 4. Sales for 2022 are $130,000. Prepare a statement of cash flows for the year ended December 31, 2022, using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1

Answer:

See explanation Section

Explanation:

                 SPLISH BROTHERS COMPANY

                      Statement of cash flows

               For the year ended Dec. 31, 2022

Net Income                                                      $44,000

Cash flow from operating activities

Depreciation Expense                     $2,600 (Note - 1)

Increases in Accounts receivable  ($3,000)

Increases in Inventory                      (17,400)

Decrease in Prepaid insurance         1,500

Increase in Accounts payable         26,200

Loss of sale of investment                 4,800 (Note - 2)

Changes in working capital                           $14,700

Net cash provided by operating activities $58,700

Cash flow from Investing activities

Sale of investment                           $12,400

Purchase of equipment                 ($30,000)

Net cash provided by investing activities  ($17,600)

Cash flow from financing activities

Paid cash dividends                        ($11,700)

Payment of Bonds                          ($10,300)

Issued stock                                       14,600

Net cash provided by financing activities   $(7,400)

Net cash changes                                          $33,700

Add: Beginning cash balance                       $13,000

Ending cash balance                                      $46,700

Note - 1

Depreciation Expense = Accumulated depreciation-equipment = 15,100 - 12,500 = $2,600

Note - 2

Loss of sale of investment = Book value of stock of investment - Disposal value = $17,200 - $12,400 = $4,800