The following information is available for the Ehrens Corporation: Ehrens Corpor
ID: 2450085 • Letter: T
Question
The following information is available for the Ehrens Corporation:
Ehrens Corporation
Balance Sheets
At December 31
2014
2013
Assets:
Cash............................................................................
$ 27,040
$ 25,440
Accounts receivable.....................................................
29,400
32,180
Merchandise inventory................................................
70,625
59,710
Long-term investments...............................................
56,000
56,000
Equipment...................................................................
175,500
145,500
Accumulated depreciation............................................
(33,550
)
(31,200
)
Total assets....................................................................
$325,015
$287,630
Liabilities:
Accounts payable.........................................................
$ 62,745
$ 42,635
Salaries payable............................................................
10,200
10,725
Long Term Bonds payable...........................................
48,750
66,000
Total liabilities...............................................................
$121,695
$119,360
Equity:
Common stock............................................................
117,000
96,000
Paid-in capital in excess of par....................................
13,000
9,000
Retained earnings.........................................................
73,320
63,270
Total equity....................................................................
$203,320
$168,270
Total liabilities and equity...............................................
$325,015
$287,630
Ehrens Corporation
Income Statement
For Year Ended December 31, 2014
Sales.............................................................
$240,000
Cost of goods sold.........................................
$80,900
Depreciation expense...................................
29,400
Other operating expenses.............................
48,000
Interest expense...........................................
2,000
(160,300
)
Other gains (losses):
Loss on sale of equipment..........................
(8,400
)
Income before taxes.....................................
71,300
Income taxes expense...................................
27,650
Net income...................................................
$ 43,650
Additional information:
(1) Received cash for the sale of equipment that had cost $37,550 yielding an $8,400 loss.
(2) New equipment was purchased for $67,550 cash.
(3) Cash dividends were paid.
(4) Additional shares of stock were issued for cash.
Prepare a statement of cash flows.
Ehrens Corporation
Balance Sheets
At December 31
2014
2013
Assets:
Cash............................................................................
$ 27,040
$ 25,440
Accounts receivable.....................................................
29,400
32,180
Merchandise inventory................................................
70,625
59,710
Long-term investments...............................................
56,000
56,000
Equipment...................................................................
175,500
145,500
Accumulated depreciation............................................
(33,550
)
(31,200
)
Total assets....................................................................
$325,015
$287,630
Liabilities:
Accounts payable.........................................................
$ 62,745
$ 42,635
Salaries payable............................................................
10,200
10,725
Long Term Bonds payable...........................................
48,750
66,000
Total liabilities...............................................................
$121,695
$119,360
Equity:
Common stock............................................................
117,000
96,000
Paid-in capital in excess of par....................................
13,000
9,000
Retained earnings.........................................................
73,320
63,270
Total equity....................................................................
$203,320
$168,270
Total liabilities and equity...............................................
$325,015
$287,630
Explanation / Answer
Ehrens Corporation Statement of Cashflow Cash flow from operations (Indirect method) Net Income $ 43,650 Add: Non cash items Loss on sale of equipment $ 8,400 Depreciation expense $ 29,400 $ 37,800 Changes in working Capital decrease in Accounts Receivable $ 2,780 Increase in Inventories $ -10,915 Increase in Accounts payable $ 20,110 Decrease in salaries payable $ -525 $ 11,450 Cashflow from Operations (A) $ 92,900 Cash Flow from Investing Activities Cash received on sale of equipment (W.N 1) $ 2,100 Purchase of new equipment $ -67,550 Net cashflow from Investing activities (B) $ -65,450 Cashflow from Financing Activities Issue of additional shares of stock $ 21,000 Increase in share premium(in excess of par) $ 4,000 Cash dividends paid (Increase in retained earnings - net income) $ -33,600 Decrease in Long term bonds payable $ -17,250 Net Cash Inflow from Financing Activities (.C) $ -25,850 Net cashflows (A)+ (B)+(.C) $ 1,600 Opening Cash $ 25,440 Closing Cash $ 27,040 W.N 1 Cash value of sale of equipment Gross Accumulated depreciation Opening 145500 31200 Add additions 67550 29400 Total 213050 60600 Less Closing Balance 175500 33550 Assets sold 37550 27050 Net cost of assets sold (Gross- Accumulated depreciation) 10500 Loss on sale of assets 8400 Cash received on sale of assets 2100
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