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.
Answered on
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.