Textbook Problem

Statement of cash flows—indirect method

List the errors you find in the following statement of cash flows. The cash balance at the beginning of the year was $240,000. All other amounts are correct, except the cash balance at the end of the year.

Shasta Inc. Statement of Cash Flows For the Year Ended December 31,20Y9
Cash flows from operating activities:
Net income...........................................	$ 360,000
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation.........................................	100,800
Gain on sale of investments...........................	17,280
Changes in current operating assets and liabilities:
Increase in accounts receivable.........................	27,360
Increase in inventories.................................	(36,000)
Increase in accounts payable...........................	(3,600)
Decrease in accrued expenses payable................	(2,400)
Net cash flow from operating activities...............		$ 463,440
Cash flows from investing activities:
Cash received from sale of investments...................	$ 240,000
Cash paid for purchase of land...........................	(259,200)
Cash paid for purchase of equipment.....................	(432,000)
Net cash flow used for investing activities..............		(415,200)
Cash flows from financing activities:
Cash received from sale of common stock.................	$312,000
Cash paid for dividends..................................	1132,000)
Net cash flow from financing activities.................		180,000
Change in cash.............................................		$ 47,760
Cash at the end of the year..................................		192,240
Cash at the beginning of the year............................		$240,000