Karr, Inc., reported net income of $300,000 for 2011. Changes occurred in several balance sheet accounts as follows: Equipment $25,000 Increase
Inventories $20,000 decrease
Accumulated depreciation 40,000 Increase
Accounts receivable 15,000 Increase
Note payable 30,000 increase
Accounts payable 5,000 decrease
Additional Information:
a. During 2011 Karr sold equipment costing $25,000, with accumulated depreciation of $12,000, for a gain of $5,000.
b. In December 2011 Karr purchased equipment costing $50,000, with $20,000 cash and a 12% note payable of $30,000.
c. Depreciation expense for the year was $52,000.
Required:
1. In Karr’s 2011 statement of cash flows, calculate net cash provided by operating activities.
2. In Karr’s 2011 statement of cash flows, calculate net cash used in investing activities.

Cash flow from operating activities = $347,000

Net cash used in Investing:=  -$2,000

Explanation:

1.

The net cash provided by operating activities by Karr, Inc., reported in 2011

Account Titles and explanation              Amount

Net income                                             $300,000

Adjustments made

Add:

Depreciation expense                            $52,000

Decrease in inventory                            $20,000

Less:

Increase in account receivable               -$15,000

Decrease in account payable                  -$5,000

Gain on sale of equipment                       -$5,000

Cash flow from operating activities           $347,000

2. Net cash used in Investing:

Sales of equipment =cost -depreciation + gain of sale

Sales of equipment                  18,000(($25,000-$12,000+$5,000)

Purchase of Equipment            20,000

Net cash used in Investing:=  -$2,000

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