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Cornerstones of Financial Accounti...

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Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Preparing a Statement of Cash Flows

Erie Company reported the following comparative balance sheets:

Chapter 11, Problem 55PSA, Preparing a Statement of Cash Flows Erie Company reported the following comparative balance sheets:

Additional Information:

1. Net income for 20l9 was $20,500.

2. Cash dividends of $7.900 were declared and paid during 2019.

3. Long-term investments with a cost of $28,600 were sold for cash at a gain of $4,100. Additional long-term investments were purchased for $14,400 cash.

4. Equipment with a cost of $14,800 and accumulated depreciation of $13,500 was sold for $3,800 cash. New equipment was purchased for $27,350 cash.

5. Depreciation expense was $18,900.

6. A principal payment of $25,000 was made on long-term notes.

7. Common stock was sold for $31,500 cash.

Required:

Prepare a statement of cash flows for Erie using the indirect method to compute net cash flow from operating activities.

To determine

In budgetary bookkeeping, a cash flow statement, otherwise called statement of cash flows, is a fiscal report that demonstrates how changes in monetary record records and pay influence cash and cash reciprocals, and separates the examination to operating, investing, and financing activities.

To compute:

Prepare a statement of cash flows for Erie using the indirect method to compute net cash flow from operating activities.

Explanation

In the books of Erie company

Cash flow statement of operating activity

Particular Detail ($) Amount ($)
Net income as per income statements 20500
Gain on sale of investment (Wn.1) (4100)
Gain on sale of equipment (wn.2) (2500)
Depreciation 18900 12300
Operating profit before working capital changes 32800
Less: increase the accounts receivable (8200)
Less: Increase the inventory (2000)
Add: Decrease the prepaid rent 4000
Less: Decrease the accounts payable (2600)
Less: Decrease the interest payable (1300)
Add: Increase the w...

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