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    rain_bow0's Avatar
    rain_bow0 Posts: 2, Reputation: 1
    New Member

    Dec 13, 2006, 08:11 AM
    CASH FLOW INDIRECT METHOD (i will appreciate any effort)
    here is the question :
    balance sheet

    assets 2002 2001
    cash 29000 13000
    accounts receivable 28000 14000
    inventory 25000 35000
    property,equipment,plant 60000 78000
    accumulated depreciation (20000) (24000)

    TOTAL 122000 116000


    accounts payable 27000 23000
    income taxes payable 5000 8000
    bonds payable 27000 33000
    common stock 18000 14000
    retained earnings 45000 38000

    TOTAL 122000 116000

    for the year ended dec 31 2002
    sales 220000
    cost of goods sold 180000

    gross profit 40000
    selling expenses 14000
    administrative expenses 10000 24000
    income from operations 16000
    interest expenses 2000
    income before income taxes 14000
    income taxe expenses 4000
    net income 10000

    additional information:
    dividends declared and paid were 3000
    equipment was sold for 8500this equipment cost 18000 originally and have a book value
    of 8500at the time of sale
    all depreciation expenses is in the selling expenses category
    all sales and purchases are on account

    cash flow from operating activities :
    net income 10000
    depreciation expenses 14000
    accounts receivable (14000)
    inventory 10000
    accounts payable 4000
    income taxes payable (3000)
    net cash provided by operating activities 21000HERE IS THE PROBLEM?

    according to the book the answer should be 12500 not 21000??
    is there is any mistake in my solution or what?
    I will appreciate any effort whether a complete solution or hint
    thanks a lot
    CaptainForest's Avatar
    CaptainForest Posts: 3,645, Reputation: 393
    Ultra Member

    Dec 13, 2006, 05:01 PM
    What about your Financing and Investing sections of the Cash Flow Statement?

    See this website, it will help to explain a Cash Flow Statement:

    rain_bow0's Avatar
    rain_bow0 Posts: 2, Reputation: 1
    New Member

    Dec 15, 2006, 12:16 AM
    I found my mistake and i put the answer for every one to know the right solution
    In the additional information the equipment costs 18000 and its book value is 8500 at the time of sale which means that accumulated depreciation = 18000-8500=9500
    And the accumulated depreciation in the balance sheet =20000-24000=-4000
    So depreciation expenses = 9500-4000=5500
    So cash flow from operating activities = 10000+5500-14000+10000+4000-3000=12500

    That's IT


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