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    Statement of cash flows

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    A. 1. $6,738 (from the income statement)
    2. $1,000 (from the income statement)
    3. $(950) (subtract increase in accounts receivable)
    4. $(1,500) (subtract increase in inventories)
    5. $(100) (subtract increase in prepaid insurance)
    6. $(250) (subtract decrease in rent payable)
    7. $350 (add increase in wages payable)
    B. Purchase of property, plant and equipment $(5,015)
    Purchase of land (1,000)
    C. Addition to loan payable $4,000
    Sale of common stock 1,000
    Purchase of treasury stock (3,000)
    Payment of dividends (1,000)
    D. Planet Accessories Company
    Statement of Cash Flows (indirect format)
    Year Ended December 31, 2007
    Operating Activities
    Net income $ 6,738
    Add/deduct items to reconcile net income
    to cash flow from operating activities:
    Depreciation $ 1,000 1
    Increase in accounts receivable (950) 2
    Increase in inventories (1,500) 3
    Increase in prepaid insurance (100) 4
    Decrease in rent payable (250) 5
    Increase in wages payable 350 6 (1,450)
    Cash flow from operating activities 5,288
    Investing Activities
    Purchase of property, plant and equipment (5,015)7
    Purchase of land (1,000)8
    Cash flow for investing activities (6,015)
    Financing Activities
    Addition to loan payable 4,000 9
    Sale of common stock 1,000 10
    Purchase of treasury stock (3,000) 11
    Payment of dividends (1,000) 12
    Cash flow from financing activities 1,000
    Net increase in cash during ...

    Solution Summary

    The solution has three problems - 1. Preparing a statement of cash flows for Plant Accessories Company, 2. Analysing the statement of cash flows for Embarcadero Company and 3. Determining the impact on cash flows and net income for a given set of transactions