UMLAUF COMPANY Balance Sheets Decomber 31, 2007 and 2008 2007 2008 Assets Cash A

Question

UMLAUF COMPANY Balance Sheets Decomber 31, 2007 and 2008 2007 2008 Assets Cash Accounts receivables Merchandise inventory Prepaid expenses Equipment Accumulated Depreciation-Equipment Patent Total Assets 23,925 34,125 156,000 3,600 135,825 (47,550) 100,000 $ 405,925 39,825 146,475 1,650 146,700 (61,950) 87,500 360,200 Liabilities and Equity Accounts Payable Income taxes payable Dividends payable Bonds payable Common stock, $10 par Paid in excess of par Retained earnings Treasury stock Total liabilities and equity $ 28,800 33,750 4,425 5,100 4,500 137,500 168,750 203,250 79,750 49,600 6,000 405,925 364,775 61,275 UMLAUF COMPANY income Statement For year Ended December 31, 2008 $446,100 Sales Cost of goods sold Other operating expenses Patent Amortization Depreciation expense $222,300 120,300 12,500 25,500 380,600 65,500 Other gains (losses) 3,300 825 Gain on sale of equipment Gain on retirement of bonds Income before taxes Income tax expense Net income 4,125 69,625 13,725 $55,900 Additional Information a. Equipment costing $21,375 with accumulated depreciation of $11,100 is sold for caslh b. Company issued 950 shares at $15 in FY 2008 c. All sales are made on credit d. All merchandise inventory purchases are on credit e. Account Payable balances result from merchandise inventory purchases f. All purchases of Long Term Assets are for cash g. 2,500 shares of common stock were issued at 40 in exchange for the bonds payables h. Company purchase 400 of its common stock for $15.00 per share

Explanation / Answer

The closing cash balance for the year 2008 is $4,575. It is the difference between the values of total assets (364,775) and liabilities (360,200) provided in the question. The cash flow statement is given below:

UMLAUF COMPANY Cash Flow Statement Cash Flow from Operating Activities Amount Net Income 55,900 Add Depreciation 25,500 Patent Amortization 12,500 Decrease in Inventory 9,525 Decrease in Prepaid Expenses 1,950 Increase in Accounts Payable 4,950 Less Gain on Sale of Equipment -3,300 Gain on Sale of Bond -825 Increase in Accounts Receivable -5,700 Decrease in Income Taxes Payable -675 Net Cash Flow from Operating Activities (A) $99,825 Cash Flow from Investing Activities Proceeds from Sale of Equipment (21,375 - 11,100 + 3,300) 13,575 Purchase of Equipment (21,375+(146,700 – 135,825)) -32,250 Net Cash Used by Investing Activities (B) -$18,675 Cash Flow from Financing Activities Proceeds from Issuance of Common Stock (950*15) 14,250 Purchase of Treasury Stock -6,000 Redemption of Bonds (137,500 – 40*2,500 - 825) -36,675 Dividends Paid (55,900 + (61,275 – 49,600) + 4,500)) -72,075 Net Cash Flow from Financing Activities (C) -$100,500 Net Increase/Decrease in Cash (A+B+C) -19,350 Add Opening Cash Balance 23,925 Closing Cash Balance $4,575 (same as mentioned above)

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