RE-POST Ratio Analysis Memo

PROBLEM 13-7B

(a) ORTEGA COMPANY

Statement of Cash Flows

For the Year Ended December 31, 2011

Cash flows from operating activities

Net income $28,000

Adjustments to reconcile net income

  to net cash provided by operating

  activities

Depreciation expense $ 8,000

Increase in income taxes payable 4,000

Increase in accounts receivable (11,000 )

Decrease in accounts payable (12,000 )

Increase in inventory  (16,000 )  (27,000 )

Net cash provided by operating

  activities  1,000

Cash flows from investing activities

Sale of equipment  10,000

Purchase of equipment (7,000 )

Net cash provided by investing

  activities    3,000

Cash flows from financing activities

Issuance of bonds  10,000

Payment of cash dividends (23,000 )

Net cash used by financing

  activities (13,000 )

Net decrease in cash  (9,000 )

Cash at beginning of period 33,000

Cash at end of period $24,000

(b) $1,000 – $7,000 – $23,000 = ($29,000)