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The comparative balance sheet of Navaria Inc. for December 31, 20Y3 and 20Y2, is as follows: Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows: a. The investments were sold for $175,000 cash. b. Equipment and land were acquired for cash. c. There were no disposals of equipment during the year. d. The common stock was issued for cash. e. There was a $90,000 debit to Retained Earnings for cash dividends declared. Instructions Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities.
Financial Accounting
Solutions
Financial Accounting
The comparative balance sheet of Navaria Inc. for December 31, 20Y3 and 20Y2, is as follows:
Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows:
-       a.           The investments were sold for $175,000 cash.
-      b.           Equipment and land were acquired for cash.
-       c.           There were no disposals of equipment during the year.
-      d.           The common stock was issued for cash.
-       e.           There was a $90,000 debit to Retained Earnings for cash dividends declared.
Instructions
Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities.
Prepare statement of cash flows using the direct method of presenting cash flows from operating activities.
Explanation of Solution
Working Note 1: Calculate the cash flows from operating activities.
| Sales revenue | $3,000,000 |
| Less: Increase in accounts receivable | (50,000) |
| Cash receipts from customers | $2,950,000 |
Table (3)
Working Note 2: Calculate the cash payments for merchandise.
| Cost of merchandise sold | $1,400,000 |
| Less: Increase in accounts payable | (40,000) |
| Add: Increase in inventory | 20,000 |
| Cash payments for merchandise | $1,380,000 |
Table (4)
Working Note 3: Calculate the cash payment for operating expenses...
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