The following information is available for Skysong Corporation for the year ended December 31, 2022.
Beginning cash balance $35,000
Accounts payable decrease 3,200
Depreciation expense 83,000
Accounts receivable increase 9,700
Inventory increase 13,400
Net income 336,000
Cash received for sale of land at book value 35,000
Sales revenue 744,500
Cash dividends paid 10,800
Income tax payable increase 4,900
Cash used to purchase building 147,500
Cash used to purchase treasury stock 39,700
Cash received from issuing bonds 216,000
Required:
(a) Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e. g. -15,000 or in parenthesis (15,000).)

Answer and Explanation:

The preparation of the cash flow statement is presented below:  

                                        Skysong Corporation

                                      Cash flow statement

                           For the year ended December 31, 2022

Cash flow from operating activities

Net operating income $336,000

Adjustment made

Add: Depreciation expenses $83,000

Less: Increase in account receivable -$9,700

Less: Increase in inventory -$13,400

Less: Decrease in account payable -$3,200

Add: Increase in income tax payable $4,900

Net cash provided by operating activities $397,600

Cash flow from investing activities  

Purchase of Building -$147,500

Sale of land $35,000

Net cash used by investing activities -$112,500

Cash flow from financing activities  

Purchase of treasury stock -$39,700

Issuance of the common stock $216,000

Dividend paid -$10,800

Net cash used by financing activities $165,500

Increase in cash $450,600

Add: Beginning cash balance $35,000

Ending cash balance $485,600

The items which shows in a positive sign represents the cash inflow and the items which depicts in a negative sign shows the cash outflow