Granite Surfaces specializes in making granite countertops. A new accounting clerk has compiled the

Granite Surfaces specializes in making granite countertops. A new accounting clerk has compiled the

Granite Surfaces specializes in making granite countertops. A new accounting clerk has compiled the following information to prepare the statement of cash flows for the year ended December 31, 2018. Net income for the year was $114,140. Depreciation expense was $15,300. Equipment was sold for a gain of $16,000. Cash proceeds from the sale were $36,000. Equipment was purchased for $250,000. Dividends of $50,000 were paid. Accounts receivable increased by $31,400. Merchandise inventory decreased by $38,700. Accounts payable increased by $41,100. Notes payable increased by $55,000. Stock was sold for $50,000 (also its book value). Cash balance on January 1, 2018 was $114,800. Cash balance on December 31, 2018 was $117,640.

The statement of cash flows the accounting clerk prepared is shown below.

Granite Surfaces

Statement of cash flows

For the Year Ended December 31, 2018

Cash Flow from Operating Activities

Net Income

$114,140

Adjustments to Reconcile Net Income to Net Cash

      Provided (used) by Operating Activities

Depreciation Expense

15,300

Change in Operating Assets and Liabilities

      increase in Accounts Receivable

31,400

      decrease in Merchandise Inventory

(38,700)

      Increase in Accounts Payable

41,100

      Sale of Equipment

(250,000)

Net Cash provided (used) by Operating Activities

($50,760)

Cash flow from Financing Activities

      proceeds from Notes Payable

55,000

Net Cash Provided (Used) by Investing Activities

55,000

Cash Flow from Financing Activities

Payments of Cash dividend

(50,000)

Proceeds from issuance of Common stock

50,000

Net Cash provided (used) by Financing activities

0

Net increase (decrease) in Cash

4,240

Cash at the beginning of the year

114,800

Cash at the end of the year

119,040 Identify the problems with the statement of cash flows that the accounting clerk prepared.

Prepare a corrected statement of cash flows.

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