The following information is for Redwood Inc. for the year ended December 31, 2016. Redwood had a cash and cash equivalents balance of $5,600 on January 1, 2016. Cash Received from:
Customers$1,940
Interest on investments 220
Sale of land 120
Sale of common stock 640
Issuance of debt securities 2,040
Cash Paid for:
Interest on debt 320
Income tax 84
Debt principal reduction 1,540
Purchase of equipment 4,500
Purchase of inventory 1,000
Dividends on common stock 220
Operating expenses 520
Required:
Prepare a statement of cash flows for the year using the direct method for operating activities. (Amounts to be deducted should be indicated with a minus sign.)

Answer and Explanation:

The preparation of the cash flow statement using the direct method is presented below:  

                                         Redwood Inc.

                                     Cash flow statement

                        For the year ended December 31, 2016

Cash flow from operating activities

Cash Received from Customers $1,940

Interest on investments $220

Less: Interest on debt -$320

Less: Income tax -$84

Less: Purchase of inventory -$1,000

Less: Operating expenses -$520

Net cash provided by operating activities $236

Cash flow from investing activities  

Sale of land $120

Less: Purchase of equipment -$4,500

Net cash used by investing activities -$4,380

Cash flow from financing activities  

Sale of common stock $640

Issuance of debt securities $2,040

Less: Debt principal reduction -$1,540

Less: Dividends on common stock -$220

Net cash provided by financing activities $920

Decrease in cash -$3,224

Add: Beginning cash balance $5,600

Ending cash balance $2,376

The items which shows in a positive sign indicates the cash inflow and the items which shows in a negative sign indicates the cash outflow and the same is to be considered

answerindustrial revolution;

answer90,000;