Cash Flow Preparation

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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……………………………………………….. ___190,000
Net cash flows from operating activities…………………….. $ 350,000
Cash flows from investing activities:
Increase 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

Problem #28: Describe the general relationship between net income and net cash flows
from operating activities for the firm.
Answer-The general relationship between net income and net cash flows from
operating activities for the firm are positive. Cash is the lifeblood of the firm and
the net cash flow from operating activities, after total adjustments, reflects a
positive cash position for the firm.
Problem #29: Has the buildup...
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