Gardner Enterprises reported a net loss of $40,000 for the year just ended. Relevant data for the company follow.
|
Beginning |
End of |
|
|
of Year |
Year |
|
|
Cash and cash equivalents |
$ 50,000 |
$ 20,000 |
|
Accounts receivable (net). |
80,000 |
65,000 |
|
Inventory |
123,000 |
130,000 |
|
Prepaid expenses |
7,500 |
4,500 |
|
Accounts payable |
55,000 |
60,000 |
|
Accrued liabilities |
10,000 |
4,000 |
|
Dividends payable. |
25,000 |
35,000 |
|
Depreciation for the year, $43,000 |
||
|
Dividends declared, $35,000 |
||
Required
1.Using the indirect method, determine the net cash flows provided by (used in) operating activities for Gardner Enterprises.
2. Interpretive Question: Explain how Gardner Enterprises can pay cash dividends during a year when it reports a net loss.