Question

The comparative balance sheets of Sage Inc. at the beginning and the end of the year 2020 are as follows.

SAGE INC. BALANCE SHEETS

Dec. 31, 2020 Jan. 1, 2020 Inc./Dec.
Assets:
Cash $48,060 $16,060 $32,000 Inc.
Accounts receivable 95,240 89,180 6,060 Inc.
Equipment 43,240 23,180 20,060 Inc.
Less: Accumulated Depreciation-Equipment 21,240 11,000 10,240 Inc.
Total $165,300 $117,420
Liabilities and Stockholders’ Equity

Accounts payable $24,240 $16,180 8,060 Inc.
Common stock 103,060 81,180 21,880 Inc.
Retained earnings 38,000 20,060 17,940 Inc.
Total $165,300 $117,420

Net income of $48,240 was reported, and dividends of $30,300 were paid in 2020. New equipment was purchased and none was sold.

Required:
Prepare a statement of cash flows for the year 2020.

Answer 1

Answer:

                                   SAGE INC.

                         Cash flow Statement

           For the Year Ended December 31, 2020

Cash flow from operating activities:

Net income                                                                      $48,240

Adjustments to reconcile net income:

• Depreciation expense $10,240
• Increase in accounts payable $8,060
• Increase in accounts receivable ($6,060)            $12,240

Net cash flow from operating activities                        $60,480

Cash flow from investing activities:

Purchase of new equipment                                        ($20,060)

Net cash flow from investing activities                       ($20,060)        

Cash flow from financing activities:

Issuance of common stock                                            $21,880

Distributed dividends                                                  ($30,300)

Net cash flow from financing activities                        ($8,420)

Net increase in cash                                                     $32,000

Cash balance January 1, 2020                                     $16,060

Cash balance December 31, 2020                             $48,060