Explore BrainMass
Share

# Correct cash flow statement

I am getting confused with the following problem. I have attached what I have done. I am looking for some assistance at understanding how complete the problem.

Ron Claims that Carpino's statement of cash flows is an excellent portrayal of a superb frist year with cash increasing \$105,000. Lisa replies that it was not a superb first year. Rather she says, the year was an operating failure, that the statement is presented incorrectly, and that \$105,000 is not the actual increase in cash. The cash balance as the beginning of the year was \$140,000.

Sources of cash
From sales of merchandise \$380,000
From sales of capital stock \$420,000
From sale of investment \$80,000
(purchased below)
From depreciation \$55,000
From issuance of note on \$20,000
truck
From Interest on investments \$6,000

Total sources of cash \$961,000

Uses of cash
For purchase of fixtures and equipment \$330,000
For merchandise purchased for resale \$258,000
For operating expenses (including dep) \$160,000
For purchase of investment \$75,000
For purchase of truck by issuance of note \$20,000
For purchase of treasury stock \$10,000
For interest on note payable \$3,000

Total uses of cash \$856,000

Net increase in cash \$105,000

Question: Using the data provided, prepare a statement of cash flows in the proper form using the INDIRECT METHOD. The only noncash items in the incomes statement are depreciation and the gain from the sale of the investment.

#### Solution Preview

The purchase of merchandise for re-sale is given so you can ...

#### Solution Summary

Excel presentation of proper cash flow statement with comments.

\$2.19