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The following information is related to Alpha Company's fiscal year 2017.

Income Statement:
Net Income $300,000
Depreciation Expense 50,000
Gain on Sale of Plant Assets 10,000
Interest Expense 500

Balance Sheet - 12/31/17:
Increase (Decrease) Accounts Payable ($4,000)
Plant Assets - Purchased 250,000
Plant Assets - Disposals (100,000)

Additional Information:
Cash Balance - 12/31/2016: $50,000
Common Stock exchanged for outstanding Long Term Notes Payable of $125,000
Dividends paid were $25,000

Use this information to prepare the Statement of Cash Flows for Alpha Company using the indirect method.

Respuesta :

Answer:

The preparation of cash flows is shown below:-

Explanation:

                  Cash flow under indirect method

Cash flow from operating activity

Net income                              $300,000

Depreciation                             $50,000

Gain on Sale of Plant Assets   ($10,000)

Decrease accounts payable    ($4,000)

Net cash flow from operating activity          $336,000

Cash flow from operating activity

Plant Assets Purchased         ($250,000)

Plant Assets Disposals            $110,000

($100,000 + $10,000)

Net cash flow from investing activity             ($140,000)

Cash flow from financing activity

Paid dividend                          ($25,000)

Net cash flow from financing activity              ($25,000)

Net cash flow                                                    $171,000

Beginning cash                                                 $50,000

Ending cash                                                      $221,000

Note :- we will not considered Common Stock exchanged for outstanding Long Term Notes Payable of $125,000 because this is a non cash investing/financing activity.

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