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Question
Additional Information for 2012:Net income was $480,000 and dividends of $400,000 were declared.
Common stock was issued for cash.
A Long-term investment was sold for $160,000.
A new Long-term investment was acquired for $360,000.
Equipment that cost $600,000 was sold for $200,000. The book value of those assets was $150,000.
The following information and financial statements excerpts pertain to Liquidity Inc.
a. All short term investments (securities available for sale) were purchased on 12/31/11 and sold during 2012.
b. The company entered a lease agreement on 12/31/12.
c. Fixed assets with a net book value of $15 were sold during the year.
d. The company repaid the current portion of long-term debt during the year.
e. Dividend was declared and partially paid.
Required:
1. Prepare the statement of cash flows for the year 2012 using the direct method.
2. Reconcile net income and net cash flows from operating activities for the year 2012.
Answer
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