Comparative Balance Sheets December 31 2017 2016 Assets Cash Accounts receivable

Question

Comparative Balance Sheets December 31 2017 2016 Assets Cash Accounts receivable Inventory Land Equipment Accumulated depreciation-equipment Total Liabilities and Stockholders' Equity Accounts payable Bonds payable Common stock ($1 par) Retained earnings Total 185,572 240,152 455,743 218,320 709,540 (180,114) 1,629,213 60,038 207,404 515,781 272,900 545,800 (87,328) $1,514,595 106,431 409,350 589,464 523,968 $1,629,213 $117,347 545,800 474,846 376,602 $1,514,595 Additional information Net income for 2017 was $ 253,797. 2. Depreciation expense was $92,786. 3. Cash dividends of $ 106,431 were declared and paid 4. Bonds payable amounting to $ 136,450 were redeemed for cash $136,450 5. Common stock was issued for $114,618 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 eg 15,000, or in parenthesis eg. (15,000)).

Explanation / Answer

Cash Flow Statement

For year ended December 31 2017

A. Cash Flows from Operating Activity

Net Income

$    253,797.00

Adjustments

Depreciation expense

$      92,786.00

Increase in Accounts receivables

$    (32,748.00)

Decrease in Inventories

$      60,038.00

Decrease in Accounts Payable

$    (10,916.00)

$    109,160.00

Net cash flow from Operating activities

$    362,957.00

B. Cash flows from Investing Activities

Sale of land

$      54,580.00

Purchase of Equipment

$ (163,740.00)

Net Cash flows from Investing activities

$ (109,160.00)

C. Cash Flows from Financing activities

Issuance of Common Stock

$    114,618.00

payments of dividends

$ (106,431.00)

Redemption of Bonds

$ (136,450.00)

Cash flows from Financing activities

$ (128,263.00)

Net Increase (Decrease) in Cash [A+B+C]

$    125,534.00

Cash at the beginning

$      60,038.00

Cash at the end

$    185,572.00

Note:

Depreciation is a non cash Expense that is why it is added back to Operating profit to calculated cash generated from operations.

When Current asset Increase or Current Liability Decrease this means that cash is used.

When Current asset Decrease or Current Liability Increase this means that cash has been saved and hence added to cash from Operations. .

Please ask if there is any query regarding this question in the comment section.

Cash Flow Statement

For year ended December 31 2017

A. Cash Flows from Operating Activity

Net Income

$    253,797.00

Adjustments

Depreciation expense

$      92,786.00

Increase in Accounts receivables

$    (32,748.00)

Decrease in Inventories

$      60,038.00

Decrease in Accounts Payable

$    (10,916.00)

$    109,160.00

Net cash flow from Operating activities

$    362,957.00

B. Cash flows from Investing Activities

Sale of land

$      54,580.00

Purchase of Equipment

$ (163,740.00)

Net Cash flows from Investing activities

$ (109,160.00)

C. Cash Flows from Financing activities

Issuance of Common Stock

$    114,618.00

payments of dividends

$ (106,431.00)

Redemption of Bonds

$ (136,450.00)

Cash flows from Financing activities

$ (128,263.00)

Net Increase (Decrease) in Cash [A+B+C]

$    125,534.00

Cash at the beginning

$      60,038.00

Cash at the end

$    185,572.00

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