Textbook Problem

Statement of cash flows—indirect method

The comparative balance sheet of Livers Inc. for December 31, 20Y3 and 20Y2, is shown as follows:

	Dec. 31, 20Y3	Dec. 31, 20Y2
Assets
Cash	$ 155,000	$ 150,000
Accounts receivable (net)	450,000	400,000
Inventories	770,000	750,000
Investments	0	100,000
Land	500,000	0
Equipment	1,400,000	1,200,000
Accumulated depreciation—equipment	(600,000)	(500,000)
Total assets	$2,675,000	$2,100,000
Liabilities and Stockholders’ Equity
Accounts payable (merchandise creditors)	$ 340,000	$ 300,000
Accrued expenses payable (operating expenses)	45,000	50,000
Dividends payable	30,000	25,000
Common stock. $4 par	700,000	600,000
Paid-in capital: Excess of issue price over par—common stock	200,000	175,000
Retained earnings	1,360,000	950,000
Total liabilities and stockholders’ equity	$2,675,000	$2,100,000

Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows:

1. A. The investments were sold for $175,000 cash.
2. B. Equipment and land were acquired for cash.
3. C. There were no disposals of equipment during the year.
4. D. The common stock was issued for cash.
5. E. There was a $500,000 credit to Retained Earnings for net income.
6. F. There was a $90,000 debit to Retained Earnings for cash dividends declared.

Instructions

Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.