Question

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.

Answer 1

Answer:

See the explanation section

Explanation:

                          Bonita Company

                     Statement of cash flow

     For the year ended, December 31, 2017

                         (Indirect Method)

Net Income                                                            $720

Cash flow from operating activities

Depreciation                                       $120

Gain on sale of investment                  (80)

Increase in Accounts receivable       (460)

Decrease in Inventory                         270

Increase in Accounts Payable            260

Decrease in accrued liabilities           (60)                  

                                                                               50  

net cash provided by operating activities         $770      

Cash flows from investing activities

Purchase of plant asset                       (170)

Sale of Held-to-Maturity Investments 230

Net Cash Provided by Investing Activities          60

Cash Flows from Financing Activities

Payment of cash dividends                 (260)

Redemption of Bonds Payable            (180)

Issuance of capital stock                       190

Net cash used by financing activities               (250)

Net increase in cash                                               580

Cash at the beginning period                              1,180

Cash at the end of period                                   1,760