Problem 23-2 The comparative balance sheets for Riverbed Corporation show the fo

Question

Problem 23-2

The comparative balance sheets for Riverbed Corporation show the following information.

December 31

2017

2016

$33,400

$12,900

12,200

10,000

11,800

9,100

–0–

2,900

–0–

29,800

45,200

20,200

5,000

6,300

$107,600

$91,200

$3,000

$4,600

2,000

4,500

–0–

5,900

5,000

2,900

–0–

4,900

3,000

4,000

31,000

25,000

43,000

33,000

20,600

6,400

$107,600

$91,200

Additional data related to 2017 are as follows.

Prepare a statement of cash flows using the indirect method. Flood damage is unusual and infrequent in that part of the country. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

December 31

2017

2016

Cash

$33,400

$12,900

Accounts receivable

12,200

10,000

Inventory

11,800

9,100

Available-for-sale debt investments

–0–

2,900

Buildings

–0–

29,800

Equipment

45,200

20,200

Patents

5,000

6,300

$107,600

$91,200

Allowance for doubtful accounts

$3,000

$4,600

Accumulated depreciation—equipment

2,000

4,500

Accumulated depreciation—building

–0–

5,900

Accounts payable

5,000

2,900

Dividends payable

–0–

4,900

Notes payable, short-term (nontrade)

3,000

4,000

Long-term notes payable

31,000

25,000

Common stock

43,000

33,000

Retained earnings

20,600

6,400

$107,600

$91,200

Explanation / Answer

SOLUTION

Riverbed Corporation

Statement of Cash Flows

For the Year Ended December 31, 2017

(a) Net Income-

(b) Loss on sale of equipment-

(c) Depreciation expense-

(d) Purchase of equipment-

Amount ($) Amount ($) Cash flows from operating activities Net income (a) 14,200 Adjustments to reconcile net income to net cash provided by operating activities:   Loss on sale of equipment (b) 4,100   Gain from flood damage [($30,000 + $2,100) - ($29,800 – $5,900)] (8,200) Depreciation expense (c)   1,900 Patent amortization ($6,300-$5,000) 1,300 Gain on sale of investments (1,700) Increase in Accts Rec (net) [($12,200-$3,000) - ($10,000-$4,600)] (3,800) Increase in inventory ($11,800- $9,100) (2,700) Increase in accounts payable ($5,000 - $2,900) 2,100 (7,000) Net cash provided by operating activities (A) 7,200 Cash flows from investing activities Sale of investments 4,600 Sale of equipment 2,500 Purchase of equipment (d) (20,000) Proceeds from flood damage to building 32,100 Net cash provided by investing activities (B) 19,200 Cash flows from financing activities   Payment of dividends (4,900)   Payment of short-term note payable (1,000) Net cash used by financing activities (C) (5,900) Increase in cash (A+B+C) 20,500 Cash, January 1, 2017 12,900 Cash, December 31, 2017 33,400

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