Comparative balance sheets for 2016 and 2015 and an income statement for 2016 ar

Question

Comparative balance sheets for 2016 and 2015 and an income statement for 2016 are provided below for A2Z Industries. Additional information from the accounting records of A2A is also provided.

A2Z Industries

Comparative Balance Sheets

December 31, 2016 and 2015 ($ in 000)

2016

2015

Assets:

Cash

$1,800

$1,125

Accounts receivable

1,800

1,350

Inventory

2,700

1,575

Land

2,025

1,800

Building

2,700

2,700

   Less: Acc. Depreciation

(900)

(810)

Equipment

8,550

6,750

   Less: Acc. Depreciation

(1,575)

(1,440)

Patent

3,600

4,500

$20,700

$17,550

Liabilties:

Accounts payable

$2,250

$1,350

Accrued expenses payable

900

675

Lease liability—land

450

0

Stockholders’ Equity:

Common Stock

9,450

9,000

PIC in excess of pa

2,250

2,025

Retained earnings

5,400

4,500

$20,700

$17,550

A2Z Industries

Income Statement

For the year ended December 31, 2016 ($ in 000)

Revenues:

   Sales revenue

$7,935

   Gain on sale of land

270

Total Revenues

$8,205

Expenses:

   Cost of goods sold

$1,800

   Depreciation expense—building

90

   Depreciation expense—equipment

945

   Loss on sale of equipment

45

   Amortization of patent

900

   Operating expenses

1,500

Total expenses

5,280

Net income

$2,925

Additional information:

          a. During 2016, equipment with a cost of $900,000 (90% depreciated) was sold.

b. The Statement of Shareholders’ Equity reveals reductions of $675,000 and $1,350,000 for stock dividends and cash dividends, respectively.

Required:

          Prepare the Statement of Cash Flows of A2Z for the year ended December 31, 2016. Use the Direct and indirect method. (Omit the schedule to reconcile net income with cash flows from Operating activities.)

A2Z Industries

Comparative Balance Sheets

December 31, 2016 and 2015 ($ in 000)

2016

2015

Assets:

Cash

$1,800

$1,125

Accounts receivable

1,800

1,350

Inventory

2,700

1,575

Land

2,025

1,800

Building

2,700

2,700

   Less: Acc. Depreciation

(900)

(810)

Equipment

8,550

6,750

   Less: Acc. Depreciation

(1,575)

(1,440)

Patent

3,600

4,500

$20,700

$17,550

Liabilties:

Accounts payable

$2,250

$1,350

Accrued expenses payable

900

675

Lease liability—land

450

0

Stockholders’ Equity:

Common Stock

9,450

9,000

PIC in excess of pa

2,250

2,025

Retained earnings

5,400

4,500

$20,700

$17,550

Explanation / Answer

Cash Flow Statement of A2Z Industries Particular Amount Amount Cash Flow from Operating Activities: Earning Before Interest and Tax 2925 Add: Depreciation on Building 90 Add: Depreciation on Equipment 945 Add: Loss on sale of Equipment 45 Add: Amortization 900 Less: Increase in inventory -1125 Less: Gain on sale of land -270 Less:Increase in account receivable -450 Add: Increase in account payable 900 Add: Increase in accrued expenses 225 Net Cash Flow from operating activity 4,185 Cash Flow from Investing Activity Sale of land 2295 Sale of equipment 135 Cash Flow from Investing activities 2430 Cash Flow from Financing Activities Payment of Cash Dividend -1350 Cash Flow from Financing Activities -1350 Net change in cash 5,265 Beginning cash Balance 1125

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