The comparative balance sheet of Iglesias Inc. for December 31, 20Y3 and 20Y2, is shown as follows:

Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows:

1. The investments were sold for $210,000 cash.
2. Equipment and land were acquired for cash.
3. There were no disposals of equipment during the year.
4. The common stock was issued for cash.
5. There was a $600,000 credit to Retained Earnings for net income.
6. There was a $108,000 debit to Retained Earnings for cash dividends declared.

• Instructions
• Prepare statement of cash flows, using the indirect method of presenting cash flows from (used for) operating activities.

Answer

Working notes:

Depreciation expense = Accumulated depreciation as on December 31, 20Y3 - Accumulated depreciation as on December 31, 20Y2

                                       = $720,000 - $600,000

                                       = $120,000

Profit on sale of investments = Amount at which Investments were sold - Opening Investment balance

                                                   = $210,000 - $120,000

                                                   = $90,000

Issuance of common stock = (Ending common stock balance - Opening common stock balance) + (Ending Paid in capital in excess of par balance - Opening Paid in capital in excess of par balance)

                                               = ($840,000 - $720,000) + ($240,000 - $210,000)

                                               = $120,000 + $30,000

                                               = $150,000

Payment of cash dividends = Opening balance of dividends payable + Dividends declared - Ending balance of Dividends payable

                                                = $30,000 + $108,000 - $36,000

                                                = $138,000 - $36,000

                                                = $102,000

PFA