Question

Condensed financial data of Monty Company for 2020 and 2019 are presented below.
MONTY COMPANY
COMPARATIVE BALANCE SHEET
AS OF DECEMBER 31, 2020 AND 2019
2020 2019
Cash $1,810 $1,160
Receivables 1,740 1,310
Inventory 1,630 1,890
Plant assets 1,910 1,720
Accumulated depreciation (1,220 ) (1,180 )
Long-term investments (held-to-maturity) 1,280 1,420
$7,150 $6,320
Accounts payable $1,220 $920
Accrued liabilities 190 240
Bonds payable 1,420 1,580
Common stock 1,940 1,730
Retained earnings 2,380 1,850
$7,150 $6,320
MONTY COMPANY
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2020
Sales revenue $6,960
Cost of goods sold 4,780
Gross margin 2,180
Selling and administrative expenses 920
Income from operations 1,260
Other revenues and gains
Gain on sale of investments 80
Income before tax 1,340
Income tax expense 550
Net income 790
Cash dividends 260
Income retained in business $530
Additional information:
During the year, $70 of common stock was issued in exchange for plant assets. No plant assets were sold in 2020.
Required:
1. Prepare a statement of cash flows using the indirect method.

Answer 1

Answer:

                       Monty Company

                 Statement of Cash Flows

                      December 31, 2020

Cash flows from operating activities

Net income                                                           $790

Adjustments to reconcile net income                  $40

+ depreciation expense $40

+ decrease in inventory $260

+ increase in accounts payable $300

- gain from sale of investments ($80)

- increase in accounts receivable ($430)

- decrease in accrued liabilities ($50)                        

Net cash flow from operating activities               $830

Cash flows from investing activities

Sale of long term investments                               $140

Gain from sale of investments                                 $80

Purchases of P, P & E                                            ($190)

Net cash flow from investing activities                    $30

Cash flow from financing activities

Issuance of Common Stocks                                  $210

- Payments of long term debt                               ($160)

- Dividends paid                                                    ($260)

Net cash from financing activities                        ($210)

Net increase in cash                                                $650

+ Beginning cash balance                                     $1,160

Ending cash balance                                             $1,810