Question

_____44. Problem: PREPARE A STATEMENT OF CASH FLOWS (20 points)

Based on the following data for Petra Co. for the year ending December 31, 2020 and the preceding year ended December 31, 2019, prepare a statement of cash flows. Use the indirect method of reporting cash flows from operating activities. In addition to the balance sheet data, assume that:

Additional Information
Equipment costing $125,000 purchased for cash.
Equipment costing $85,000 with accumulated depreciation of $65,000 sold for $15,000, resulting a loss of $5,000.
The stock was issued for cash.
Net income for the year 2020 is $51,000.
Depreciation for the year 2020 is $57,000 and loss from sale of equipment is $5,000.
Cash dividends paid for 2020 is $12,000.



Year
Year


2020
2019
Cash
$100,000
$ 78,000
Accounts receivable (net)
78,000
85,000
Inventories
101,500
90,000
Equipment
410,000
370,000
Accumulated depreciation
(150,000)
(158,000)


$539,500
$465,000






Accounts payable (merchandise creditors)
$ 58,500
$ 55,000
Cash dividends payable
5,000
4,000
Common stock, $10 par
200,000
170,000
Paid-in capital in excess of par--




common stock
62,000
60,000
Retained earnings
214,000
176,000


$539,500
$465,000

Answer 1

Answer:

Petra Co.

Petra Co.

Statement of Cash Flows for the year ended December 31

Operating activities:

Net income for the year 2020        $51,000

Depreciation for the year 2020       57,000

Loss from sale of equipment             5,000

Changes in working capital:

Accounts receivable (net)                   7,000

Inventories                                         (11,500)

Accounts payable                               3,500

Net cash flow from operations   $ 112,000

Investing activities:

Purchase of equipment             ($125,000)

Sale of equipment                           15,000

Net cash flow from investing     ($110,000)

Financing activities:

Issue of common stock               $32,000

Cash Dividend                               (12,000)

Net cash flow from financing     $20,000

Net cash inflows                         $22,000

Reconciliation of cash balances:

Beginning cash balance            $ 78,000

Net cash inflows                           22,000

Ending cash balance                $100,000

Explanation:

a) Data and Calculations:

                                                        Year       Year

                                                       2020       2019         Change

Cash                                          $100,000    $ 78,000    +$22,000

Accounts receivable (net)            78,000       85,000         -7,000

Inventories                                   101,500       90,000       +11,500

Equipment                                  410,000      370,000     +40,000

Accumulated depreciation       (150,000)    (158,000)      (-8,000)

                                                $539,500  $465,000

Accounts payable                     $ 58,500  $ 55,000        +$3,500

Cash dividends payable                5,000        4,000           +1,000

Common stock, $10 par           200,000     170,000       +30,000

Paid-in capital in excess of par 62,000      60,000         +2,000

Retained earnings                     214,000     176,000       +38,000

                                               $539,500 $465,000

Additional information

1. Purchase of equipment $125,000

2. Sale of equipment $15,000

3. The stock was issued for cash.

4. Net income for the year 2020 = $51,000

5. Depreciation for the year 2020 = $57,000

6. Loss from sale of equipment = $5,000

7. Cash dividends paid for 2020 = $12,000