Exercise 5-16 (Part Level Submission) A comparative balance sheet for Pearl Corp

Question

Exercise 5-16 (Part Level Submission) A comparative balance sheet for Pearl Corporation is presented below December 31 Assets Cash Accounts receivable Inventory Land Equipment Accumulated Depreciation-Equipment 2017 2016 $ 72,670 22,000 84,500 182,500 73,500 262,500 68,830 191,830 112,830 202,830 (71,500) (44,830 ) $604,170 $553,490 Total Liabilities and Stockholders' Equity Accounts payable Bonds payable Common stock ($1 par) Retained earnings $ 36,500 $49,830 200,000 164,000 139,660 $604,170 $553,490 150,000 214,000 203,670 Total Additional information: 1. Net income for 2017 was $130,000. No gains or losses were recorded in 2017 2. Cash dividends of $65,990 were declared and paid 3. Bonds payable amounting to $50,000 were retired through issuance of common stock.

Explanation / Answer

Answer:-

Issued common stock of $50000 to retire $50000 of bonds outstanding.

Pearl Corporation Statement of Cash Flow (Using Indirect Method) For the year ended, December 31,2017 Particulars Amount $ Cash flow from opreating activities Net Income 130000 Adjustments to reconcile net income to net cash provided by opreating activities Adjustment for non cash effects Depreciation 26670 Change in opreating assets & liabilities Increase in accounts receivable -15670 Decrease in inventory 9330 Decrease in accounts payable -13330 Net cash flow from opreating activities (a) 137000 Cash Flow from Financing activities Dividend paid -65990 Net cash Flow from Financing activities (b) -65990 Cash Flow from Investing activities Land sold 39330 Equipment purchased -59670 Net cash Flow from Investing activities (c) -20340 Net Channge in cash c=a+b+c 50670 Beginning cash balance 22000 Closing cash balance 72670

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