Exercise 12-7 Shown below are comparative balance sheets for Mitch Company. Mitc

Question

Exercise 12-7 Shown below are comparative balance sheets for Mitch Company. Mitch Company Comparative Balance Sheets December 31 Assets 2017 2016 Cash $ 68,000 $ 22,000 Accounts receivable 88,000 76,000 Inventory 167,000 189,000 Land 80,000 100,000 Equipment 260,000 200,000 Accumulated depreciation—equipment (66,000 ) (32,000 ) Total $597,000 $555,000 Liabilities and Stockholders’ Equity Accounts payable $ 39,000 $ 43,000 Bonds payable 150,000 200,000 Common stock ($1 par) 216,000 174,000 Retained earnings 192,000 138,000 Total $597,000 $555,000 Additional information: 1. Net income for 2017 was $93,000. 2. Depreciation expense was $34,000. 3. Cash dividends of $39,000 were declared and paid. 4. Bonds payable amounting to $50,000 were redeemed for cash $50,000. 5. Common stock was issued for $42,000 cash. 6. No equipment was sold during 2017. 7. Land was sold for its book value. Prepare a statement of cash flows for 2017 using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000, or in parenthesis e.g. (15,000)). Mitch Company Statement of Cash Flows $ Adjustments to reconcile net income to $ $

Explanation / Answer

statement of cash flows for 2017 using the indirect method.

Cash flow from operating activities Net income 93000 Adjustment to reconcile net income to cash flow from operating activities Depreciation expense 34000 Increase account receivable -12000 Decrease inventory 22000 Decrease account payable -4000 40000 Net cash flow from operating activities 133000 Cash flow from investing activities Sale of land 20000 Purchase of equipment -60000 Net cash flow from investing activities -40000 Cash flow from financing activities Redemption of bonds -50000 Dividend paid -39000 Issue common Stock 42000 Net cash flow from financing activities -47000 Net Cash flow 46000 Beginning cash 22000 Ending cash 68000

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