Assignment Cash Preparation

27.

CROSBY CORPORATION

Statement of Cash Flows

For the Year Ended December 31, 2008

Cash flows from operating activities:

Net income (earnings after taxes) . . . . . . . . . . . . . . . . . . . . . . $ 160,000

Adjustments to determine cash flow from operating activities:

Add back depreciation . . . . . . . . . . . . . . . . . . . . . . . . $ 150,000

Increase in accounts receivable . . . . . . . . . . . . . . . . . . (50,000)

Increase in inventory . . . . . . . . . . . . . . . . . . . . . . . . . . (20,000)

Decrease in prepaid expenses . . . . . . . . . . . . . . . . . . . 20,000

Increase in accounts payable . . . . . . . . . . . . . . . . . . . . 190,000

Decrease in accrued expenses . . . . . . . . . . . . . . . . . . (20,000)

Total adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270,000

Net cash flows from operating activities . . . . . . . . . . . . . . . . . $ 430,000

Cash flows from investing activities:

Decrease in investments (long-term securities) . . . . . 10,000

Increase in plant and equipment . . . . . . . . . . . . . . . . (400,000)

Net cash flows from investing activities . . . . . . . . . . . . . . . . . . . ($390,000)

Cash flows from financing activities:

Increase in bonds payable . . . . . . . . . . . . . . . . . . . . . . . 50,000

Preferred stock dividends paid . . . . . . . . . . . . . . . . . . . (10,000)

Common stock dividends paid . . . . . . . . . . . . . . . . . . . (50,000)

Net cash flows from financing activities . . . . . . . . . . . . . . . . . . . . (10,000)

Net increase (decrease) in cash flows . . . . . . . . . . . . . . . . . . . . . . $ 30,000

28.

The general relationship between net income and net cash flows from operating activities for the firm is that net income only shows how much the company has made after taxes were paid while net cash flows shows the income after operating costs and revenues have been included. They both show the income...