The income statement, balance sheets, and additional information for Video Phone
ID: 2483237 • Letter: T
Question
The income statement, balance sheets, and additional information for Video Phones, Inc., are provided.
VIDEO PHONES, INC.
Income Statement
For the Year Ended December 31, 2018
Net sales $ 3,236,000
Expenses:
Cost of goods sold $ 2,100,000
Operating expenses 888,000
Depreciation expense 30,000
Loss on sale of land 8,300
Interest expense 16,500
Income tax expense 51,000
Total expenses 3,093,800
Net income $ 142,200
VIDEO PHONES, INC.
Balance Sheet
December 31
2018 2017
Assets
Current assets:
Cash $ 226,580 $ 169,140
Accounts receivable 84,300 63,000
Inventory 105,000 138,000
Prepaid rent 12,720 6,360
Long-term assets:
Investments 108,000 0
Land 213,000 246,000
Equipment 276,000 213,000
Accumulated depreciation (72,600) (42,600)
Total assets $ 953,000 $ 792,900
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 68,700 $ 84,000
Interest payable 6,300 10,600
Income tax payable 15,300 14,300
Long-term liabilities:
Notes payable 291,000 228,000
Stockholders' equity:
Common stock 330,000 330,000
Retained earnings 241,700 126,000
Total liabilities and stockholders’ equity $ 953,000 $ 792,900
Additional Information for 2018:
1. Purchase investment in bonds for $108,000.
2. Sell land costing $33,000 for only $24,700, resulting in a $8,300 loss on sale of land.
3. Purchase $63,000 in equipment by borrowing $63,000 with a note payable due in three years. No cash is exchanged in the transaction.
4. Declare and pay a cash dividend of $26,500.
Required:
Prepare the statement of cash flows using the indirect method. Disclose any noncash transactions in an accompanying note.
Explanation / Answer
Answer:
Purchase $63,000 in equipment by borrowing $63,000 with a note payable due in three years. No cash is exchanged in the transaction. It is not disclosed.
VIDEO PHONES, INC Statement of Cash Flows Cash Flow from operating activities: Net income 142200 Adjustment: Depreciation exp 30000 Loss on sale of land 8300 Increase in accounts receivable -21300 Decrease in inventory 33000 Increase in prepaid exp -6360 Decrease in accounts payable -15300 Decrease in interest payable -4300 Increase in income tax payable 1000 Net cash Flow provided by operating activities 167240 Cash Flow From investing activities: Sale of land 24700 Purchase of investment -108000 Net cash Flow used in investing activities -83300 Cash Flow from financing activities: Cash Dividend Paid -26500 Net cash Flow used in financing activities -26500 Net increase or dec in cash 57440 Add: opening cash 169140 Closing cash 226580Related Questions
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