Additional information: > During 2015 equipment with an original cost of $50,000
ID: 2484214 • Letter: A
Question
Additional information:
> During 2015 equipment with an original cost of $50,000 was sold for cash, and equipment costing $125,000 was purchased.
> On January 1, 2015, bonds with a par value of $500,000 and related premium of $75,000 were redeemed. The $1,000 face value, 10% par bonds had been issued on January 1, 2006 to yield 8%. Interest is payable annually every December 31 through 2025.
> Bravo's tax payments during 2015 were debited to Income Taxes Payable. Bravo recorded a deferred income tax liability of $42,000 based on temporary differences of $120,000 and an enacted tax rate of 35% at December 31, 2014; prior to 2014 there were no temporary differences. Bravo's 2015 financial statement income before income taxes was greater than its 2015 taxable income, due entirely to temporary differences, by $60,000. Bravo's cumulative net taxable temporary differences at December 31, 2015, were $180,000. Bravo's enacted tax rate for the current and future years is 35%.
> 60,000 shares of common stock, $2.50 par, were outstanding on December 31, 2014.
> Bravo issued an additional 80,000 shares on April 1, 2015.
> There were no changes to retained earnings other than dividends declared. Prepare a statement of cash flows using the indirect method.
Explanation / Answer
Particulars Detail Amount Cash Flow from operating activities Net Profit 195000 Provision for income tax 105000 Depreciation 88000 Interest Income -14000 Interest exp 46000 Loss on sale of Equipment 7000 Gain on extingushment of bonds -90000 Cash Flow before adjusting working capital adjustments 337000 Increase in accounts receivables -60000 Cash Flows after adjusting working capital adjustments 277000 Income tax paid -195000 82000 Cash Flow from investing activities Purchase of plant & equipment -125000 Sale of equipment 20000 -105000 Cash flow from financing activities Issue of common stock 200000 Additional paid up capital 55000 Interest Exp -105000 Redemption of bonds -500000 Unamortized premium on bonds -79000 Interest Income 14000 -415000 Net increase in cash during the year -520000 Add: Opening cash balance 817000 Closing cash balance 297000 Income tax payable a/c Particulars Amount Particulars Amount To cash 195000 By Balance b/d 150000 To Balance c/d 60000 By P & l a/c 105000 255000 255000 Deffered tax payable a/c Particulars Amount Particulars Amount To cash 0 By Balance b/d 42000 To Balance c/d 63000 By P & l a/c 21000 63000 63000 Equipment Particulars Amount Particulars Amount To Balance b/d 995000 By Accumulated Dep 23000 To Cash 125000 By P & L 7000 By Cash 20000 By Balance c/d 1070000 1120000 1120000 Accumulated Depreciation Particulars Amount Particulars Amount To Equipement a/c 23000 By Balance b/d 280000 To Balance c/d 345000 By P & L 88000 368000 368000
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