1.The balance sheets for ABC Company showed the following information. Additiona

Question

1.The balance sheets for ABC Company showed the following information. Additional information concerning transactions and events during 2015 are presented below.

Additional data:

1.Net income for the year ended December 31, 2015, $71,000.

2.Depreciation on plant assets for the year, $12,700.

3.Sold the long-term investments for $28,000 (assume gain or loss is ordinary).

4.Paid cash dividends of $30,000.

5.Purchased machinery costing $26,500, paid cash.

6.Purchased machinery and received a $60,000 long-term note loan (assume no cash was received or paid by the company in this transaction).

7.Paid a $40,000 long-term note payable by issuing common stock.

Instructions

prepare a statement of cash flows (using the indirect method for the operating activities section) for 2015 for ABC Company.

ABC balance sheet 2015 2014 Cash 35900 10200 Accounts payable 38300 20300 Inventory 35000 42000 Long-tern investment 0 15000 Property, plant & equipment 236500 150000 Accumulated depreciation (37700) (25000) Total $308000 $212500 Accounts payable 17000 26500 Accrued liabilities 21000 17000 Long-term notes payable 70000 50000 Common stock 130000 90000 Retained earning 70000 29000 $308000 $212000

Explanation / Answer

Particulars 2015 2014 Difference Cash $35,900 $ 10,200 $ 25,700 Accounts payable $ 38,300 $ 20,300 $18,000 Inventory $ 35,000 $ 42,000 $ (7,000) Long-tern investment $-   $ 15,000 $(15,000) Property, plant & equipment $ 236,500 $ 150,000 $ 86,500 Accumulated depreciation $ (37,700) $ (25,000) $ (12,700) Total $ 308,000 $ 212,500 Accounts payable $ 17,000 $ 26,500 $ (9,500) Accrued liabilities $ 21,000 $17,000 $ 4,000 Long-term notes payable $ 70,000 $ 50,000 $ 20,000 Common stock $ 130,000 $ 90,000 $ 40,000 Retained earning $ 70,000 $29,000 $41,000 $ 308,000 $ 212,000 $ 191,000 ABC COMPANY Cash flow Statement Cash flow from operating activities Net Income $71,000 Add: Depreciation 12700 Less: gain on long term investment -13000 Increase in accounts receivable $           (18,000) Decrease in inventory $                7,000 Decrease in accounts payable $              (9,500) Increase in accrued liabilities $                4,000 Cash flow from operations $              54,200 Cash flow from Investing activities Purchased Machinery $           (26,500) sale of long term inestment $              28,000 Cash flow from Investing activities $                1,500 Cash flow form financing activities Dividends paid $           (30,000) Cash flow form financing activities $           (30,000) Beginning cash balance 2014 $              10,200 Ending cash balance 2015 $              35,900

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