Help with Cash Flow Question?

Question

I need to know cash flows from operating, investing and financing activities for year 2? I think operating activities are 0

I will list year 1 first and than year 2 second:

A/P 150000 100000

income taxes payable 80000 30000

bonds payable 100000 80000

common stock 100000 200000

net income 150000

Year 2 purchase of equipment was made in cash, any changes to long term liability or stock account involves cash.

any help would be great.

Answer 1

* Net income per the income statement

* Minus entries to income accounts that do not represent cash flows

* Plus entries to expense accounts that do not represent cash flows

* Equals cash flows before movements in working capital

* Plus or minus the change in working capital, as follows:

o An increase in current assets (excluding cash and cash equivalents) would be shown as a negative figure because cash was spent or converted into other current assets, thereby reducing the cash balance.

o A decrease in current assets would be shown as a positive figure, because other current assets were converted into cash.

o An increase in current liabilities (excluding short-term debt which would be reported in the financing activities section) would be shown as a positive figure since more liabilities mean that less cash was spent.

o A decrease in current liabilities would be shown as a negative figure, because cash was spent in order to reduce liabilities.