AERO INC. BALANCE SHEET DECEMBER 31, 2016 Prepare a statement of cash flows for
ID: 2340342 • Letter: A
Question
AERO INC.
BALANCE SHEET
DECEMBER 31, 2016
Prepare a statement of cash flows for the year 2017 for Aero.
Aero Inc. had the following balance sheet at December 31, 2016.AERO INC.
BALANCE SHEET
DECEMBER 31, 2016
During 2017, the following occurred.
1. Aero liquidated its available-for-sale investment portfolio at a loss of $5,000. 2. A tract of land was purchased for $38,000. 3. An additional $30,000 in common stock was issued at par. 4. Dividends totaling $10,000 were declared and paid to stockholders. 5. Net income for 2017 was $35,000, including $12,000 in depreciation expense. 6. Land was purchased through the issuance of $30,000 in additional bonds. 7. At December 31, 2017, Cash was $70,200, Accounts Receivable was $42,000, and Accounts Payable was $40,000.
Explanation / Answer
AERO INC.
Cash Flow Statement
For the year ended December 31 2017
A. Cash Flows from Operating Activity
Net Income
$ 35,000.00
Adjustments to reconcile net income to net cash flows from operating activities
Depreciation expense
$ 12,000.00
loss on sale of Investments`
$ 5,000.00
Increase in Accounts receivables
$ (20,800.00)
Increase in Accounts payables
$ 10,000.00
$ 6,200.00
Net cash flow from Operating activities
$ 41,200.00
B. Cash flows from Investing Activities
Sale of Investment
$ 27,000.00
Purchase of Land
$ (38,000.00)
Net Cash flows from Investing activities
$ (11,000.00)
C. Cash Flows from Financing activities
Cash received on issue of common stock
$ 30,000.00
payments of dividends
$ (10,000.00)
Cash flows from Financing activities
$ 20,000.00
Net Increase (Decrease) in Cash [A+B+C]
$ 50,200.00
Cash at the beginning of the period
$ 20,000.00
Cash at the end of the period
$ 70,200.00
Note:
Land Purchase by issue of bonds as well as bonds issued in exchange of land will not be a part of cash flow statement.
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. .
Additional information
Ending balance sheet
Beginning balances 2017
Change in balances
Ending balance December 2017
Cash
$ 20,000.00
$ 50,200.00
$ 70,200.00
Accounts receivable
$ 21,200.00
$ 20,800.00
$ 42,000.00
Investments
$ 32,000.00
$ (32,000.00)
$ -
Plant assets (net)
$ 81,000.00
$ (12,000.00)
$ 69,000.00
Land
$ 40,000.00
$ 68,000.00
$ 108,000.00
Total Assets
$ 194,200.00
$ 289,200.00
Accounts payable
$ 30,000.00
$ 10,000.00
$ 40,000.00
Bonds payable
$ 41,000.00
$ 30,000.00
$ 71,000.00
Common stock
$ 100,000.00
$ 30,000.00
$ 130,000.00
Retained earnings
$ 23,200.00
$ 25,000.00
$ 48,200.00
Total Liabilities
$ 194,200.00
$ 95,000.00
$ 289,200.00
AERO INC.
Cash Flow Statement
For the year ended December 31 2017
A. Cash Flows from Operating Activity
Net Income
$ 35,000.00
Adjustments to reconcile net income to net cash flows from operating activities
Depreciation expense
$ 12,000.00
loss on sale of Investments`
$ 5,000.00
Increase in Accounts receivables
$ (20,800.00)
Increase in Accounts payables
$ 10,000.00
$ 6,200.00
Net cash flow from Operating activities
$ 41,200.00
B. Cash flows from Investing Activities
Sale of Investment
$ 27,000.00
Purchase of Land
$ (38,000.00)
Net Cash flows from Investing activities
$ (11,000.00)
C. Cash Flows from Financing activities
Cash received on issue of common stock
$ 30,000.00
payments of dividends
$ (10,000.00)
Cash flows from Financing activities
$ 20,000.00
Net Increase (Decrease) in Cash [A+B+C]
$ 50,200.00
Cash at the beginning of the period
$ 20,000.00
Cash at the end of the period
$ 70,200.00
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