The balance sheets for King Company showed the following information. Additional
ID: 2474761 • Letter: T
Question
The balance sheets for King Company showed the following information. Additional information concerning transactions and events during 2015 are presented below:
King Company
Balance Sheet
($ in thous)
__December 31
2015 2014
Cash $12,700 $10,200
Accounts Receivable 53,400 20,300
Inventory 25,000 29,000
Investments – Trading Securities (Net) 14,000 13,000
Long Term Investments - Common Stock 460,000 315,000
Property, Plant & Equipment 266,500 150,000
Accumulated Depreciation (35,600) (25,000)
Total Assets $796,000 $512,500
Accounts Payable $16,000 $26,500
Other Accrued Liabilities 28,000 17,000
Dividends Payable 35,000 -0-
Bonds Payable 150,000 100,000
Common Stock 100,000 50,000
Additional Paid-Capital – Common Stock 200,000 100,000
Retained Earnings 367,000 219,000
Treasury Stock (100,000) -0-
Total Liabilities and Stockholders’ Equity $796,000 $512,500
Additional data for 2015:
($ in thous)
Net Income for the year, $250,000
Plant Assets that cost $15,000 were sold for $5,000. The gain of $2,000 on the sale was reported in net income.
Dividends declared were $102,000
During the year common stock was issued at an amount above par.
Recorded an adjusting entry at year end for a $1,000 unrealized gain on Trading securities. (note: the account Investments – Trading Securities is a net amount with the Securities Fair Value Adjustment account)
King uses the Equity Method of Accounting for Investments in Common Stock. During 2015, King reported $10,000 of equity income.
Instructions: Prepare a Statement of Cash Flows (use the indirect method) for 2015 for the King Company.
Statement of Cash Flows – Account Analysis Worksheet
($ in thous)
Assets
2015
2014
Change
Cash
$12,700
$10,200
$2,500
Accounts Receivable
53,400
20,300
33,100
Inventory
25,000
29,000
(4,000)
Investments – Trading Securities (net)
14,000
13,000
1,000
Long Term Investments – Common Stock
460,000
315,000
145,000
Property, Plant & Equipment
266,500
150,000
116,500
Accumulated Depreciation
(35,600)
(25,000)
(10,600)
Total Assets
$796,000
$512,500
$283,500
Liabilities and Stockholders’ Equity
Accounts payable
$16,000
$26,500
$(10,500)
Other accrued liabilities
28,000
17,000
11,000
Dividends payable
35,000
--
35,000
Bonds payable
150,000
100,000
50,000
Common stock
100,000
50,000
50,000
Additional paid-in-capital, common stock
200,000
100,000
100,000
Retained earnings
367,000
219,000
148,000
Treasury stock
(100,000)
(100,000)
Total liabilities and equity
$796,000
$512,500
$283,500
King Company
Statement of Cash Flows
For the year ended December 31, 2015
Net income
Net Increase to cash
Cash Balance 12/31/2014
Cash Balance 12/31/2015
Assets
2015
2014
Change
Cash
$12,700
$10,200
$2,500
Accounts Receivable
53,400
20,300
33,100
Inventory
25,000
29,000
(4,000)
Investments – Trading Securities (net)
14,000
13,000
1,000
Long Term Investments – Common Stock
460,000
315,000
145,000
Property, Plant & Equipment
266,500
150,000
116,500
Accumulated Depreciation
(35,600)
(25,000)
(10,600)
Total Assets
$796,000
$512,500
$283,500
Liabilities and Stockholders’ Equity
Accounts payable
$16,000
$26,500
$(10,500)
Other accrued liabilities
28,000
17,000
11,000
Dividends payable
35,000
--
35,000
Bonds payable
150,000
100,000
50,000
Common stock
100,000
50,000
50,000
Additional paid-in-capital, common stock
200,000
100,000
100,000
Retained earnings
367,000
219,000
148,000
Treasury stock
(100,000)
(100,000)
Total liabilities and equity
$796,000
$512,500
$283,500
Explanation / Answer
Net Profit $ 2,50,000 Adjustment: Add: Depreciation $ 22,600 Decrease in inventory $ 4,000 Increase in accrued liabilites $ 11,000 Less: Increase in accounts receivable $ -33,100 Increase in investments-trading security $ -1,000 Decrease in accounts payable $ -10,500 Gain in sale of plant $ -2,000 $ -9,000 Net cash flow from operating activites $ 2,41,000 Investing Activites Sale of plant $ 5,000 Purchase of plant (266500+15000-150000) $ -1,31,500 Purchase of long term investments $ -1,45,000 Net cash flow from investing activities $ -2,71,500 Financing Activites Issue of bond $ 50,000 Issue of common stock $ 1,50,000 purchase of treasury stock $ -1,00,000 payment of dividend (102000 - 35000) $ -67,000 Net cash flow from financing activites $ 33,000 Net Increase in Cash $ 2,500 Cash Balance 12/31/2014 $ 10,200 Cash Balance 12/31/2015 $ 12,700
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