North Mountain Nursery Inc Statement of Cash flows Cash flow using Indirect methood Net Income Add.

Depreciation Less Increase in A/C receivable Less Increase in Inventory Add Inc in A/C Payable Less Utility Payable Add.Salary and wages liability Add.Income Tax Payable

106300 20000 -45000 -15300 20000 -750 250 150 85650

Investment Add Profit on sale of assets Add Increase in Purchase of equipment

25000 -75000 -50000

Financial activities Less Loans paid Less dividends paid

-18000 -20000 -38000

Remarks Non Cash expenses should be deducted for preparing the cash flow statement. Depreciation is a non cash expense Less Increase in current assets(700000-655000). Since there is no movement of cash, account receivable should bededucted Less Increase in current assets. Cash is paid to acquire this Plus Increase in current liabilities. Cash is not paid hence balance in acc payable should be added opening bal is 19000; closing bal is 18250; so the difference is paid in cash Plus Increase in current liabilities. Cash is not yet paid Plus Increase in current liabilities. Cash is not yet paid for tax

Cash receipt as a result of sale of assets The is cash outflow due to this investment activity

Loan amount is paid in cash. Hence there is cash outflow Dividends are paid in Cash. Hence there is cash outflow

Cash flow from Operating Activitis Cash flow from Investment Activities Cash flow from Financial activities Net cash flow during the year Opening Cash balance Dec31, 2005 Closing cash balance Dec 31, 2006 Hence the closing cash balance tallies with the initial cash balance + the net cash flow during the year.

85650 -50000 -38000 -2350 47950 45600