Year-End Balance Sheet and Statement of Cash Flows–Indirect Method The balance s
ID: 2432332 • Letter: Y
Question
Year-End Balance Sheet and Statement of Cash Flows–Indirect Method
The balance sheet of Poodle Company at the end of 2016 is presented here, along with certain other information for 2017:
Other information is as follows:
Net income for 2017 was $50,000.
Included in operating expenses was $25,000 in depreciation.
Cash dividends of $40,000 were declared and paid.
An additional $50,000 of common stock was issued for cash.
Bonds payable of $100,000 were purchased for cash and retired at no gain or loss.
Cash purchases of plant and equipment during the year were $60,000.
An additional $200,000 of land was acquired in exchange for a long-term note payable.
During the year, sales exceeded cash collections on account by $15,000. All sales are on account.
The amount of current liabilities decreased by $20,000 during the year.
Required:
1. Prepare a statement of cash flows for 2017 using the indirect method in the Operating Activities section. Include a supplemental schedule for noncash activities. Use the minus sign to indicate cash payments, cash outflows, or decreases in cash.
2. Prepare a balance sheet at December 31, 2017.
3. What primary uses did Poodle make of the cash it generated from operating activities?
December 31, 2016Explanation / Answer
Poodle Company
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash Flow from Operating Activities:
Net Income
$ 50,000.00
Add: Adjustments
Depreciation
$ 25,000.00
Increase in Accounts Receivables
$ (15,000.00)
Decrease in Current Liabilities
$ (20,000.00)
$ (10,000.00)
A. Cash Flow from Operating Activities
$ 40,000.00
Cash Flow from Investing Activities:
Purchase of Plant and Equipment
$ (60,000.00)
B. Cash Used in Investing Activities
$ (60,000.00)
Cash Flow from Financing Activities:
Retirement of Bonds
$ (100,000.00)
Dividend Paid
$ (40,000.00)
Issue of Common stock in Cash
$ 50,000.00
C. Cash Flow from Financing Activities
$ (90,000.00)
Increase (Decrease) in cash [A+B+C]
$ (110,000.00)
Add: Cash balance, December 31, 2016
$ 155,000.00
Cash balance, December 31, 2017
$ 45,000.00
Poodle Company
Balance Sheet
As at December 31, 2017
Assets
Current Assets
Cash
$ 45,000.00
Accounts Receivables
$ 155,000.00
Total Current Assets
$ 200,000.00
Equipment
$ 760,000.00
Less-Accumulated Depreciation
$ 200,000.00
$ 560,000.00
Land
$ 300,000.00
Investments
$ 125,000.00
Total Long Term Assets
$ 985,000.00
Total Assets
$ 1,185,000.00
Liabilities
Current Liabilities
$ 305,000.00
Notes Payable Long term
$ 200,000.00
Total Liabilities
$ 505,000.00
Owner's Equity
Common Stock
$ 550,000.00
Retained Earnings
$ 130,000.00
Total Liability and Owner's Equity
$ 1,185,000.00
Retained Earnings Closing Balance
Opening Balance
$ 120,000.00
Add: Profits during Year
$ 50,000.00
Less: Dividends Paid
$ 40,000.00
Closing Balance
$ 130,000.00
The question says Sales exceeds the amount of collections and if all sales are on credit then $15000 of sales has not yet been collected so accounts receivables balance is increased by $15000.
Schedule of Non cash Investing and Financing Activities
Non Cash Investing Activities.
Purchase of Land in exchange of Notes Payable
$ 200,000.00
Non Cash Financing Activities.
Issue of notes payable in exchange of Land asset
$ 200,000.00
Poodle primarily used Cash from operations to buy Equipment.
Poodle Company
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash Flow from Operating Activities:
Net Income
$ 50,000.00
Add: Adjustments
Depreciation
$ 25,000.00
Increase in Accounts Receivables
$ (15,000.00)
Decrease in Current Liabilities
$ (20,000.00)
$ (10,000.00)
A. Cash Flow from Operating Activities
$ 40,000.00
Cash Flow from Investing Activities:
Purchase of Plant and Equipment
$ (60,000.00)
B. Cash Used in Investing Activities
$ (60,000.00)
Cash Flow from Financing Activities:
Retirement of Bonds
$ (100,000.00)
Dividend Paid
$ (40,000.00)
Issue of Common stock in Cash
$ 50,000.00
C. Cash Flow from Financing Activities
$ (90,000.00)
Increase (Decrease) in cash [A+B+C]
$ (110,000.00)
Add: Cash balance, December 31, 2016
$ 155,000.00
Cash balance, December 31, 2017
$ 45,000.00
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