HOMEWORK - Spring 2018 - ACT 3391 48. (20 points) Diane’s balance sheets as of D
ID: 2527506 • Letter: H
Question
HOMEWORK - Spring 2018 - ACT 3391
48. (20 points) Diane’s balance sheets as of December 31, 2016 and 2017 are presented below:
2016 2017
Cash $ 450,000 $ 825,000
Accounts receivable, net 290,125 390,000
Prepaid rent 10,000 3,000
Long-term notes receivable 100,000 150,000
Discount on long-term notes receivable ( 5,740) ( 3,388)
Property, plant, and equipment – at cost 560,200 715,000
Accumulated depreciation ( 186,585) (224,612)
TOTAL ASSETS $1,218,000 $1,855,000
Accrued liabilities $ 238,000 $ 240,000
Unearned revenues 225,000 210,000
Short-term debt 25,000 15,000
Long-term debt 210,000 300,000
Common stock, $1 par value 50,000 90,000
Additional paid-in-capital 150,000 450,000
Retained earnings 320,000 550,000
TOTAL LIABILITIES & SE $1,218,000 $1,855,000
Diane’s 2017 income statement is presented below
Service revenues $1,400,000
Other revenues and gains/losses, net 17,828
Selling, general, and administrative expenses 970,000
Impairment loss 17,000
Interest expense 12,200
Income before income taxes 418,628
Income tax expense 118,628
Net income $ 300,000
SELECTED OTHER INFORMATION:
1. On December 31, 2015, Diane provided services to a customer in exchange for a $100,000, zero interest bearing note receivable. Diane will collect the note principal in full on December 31, 2018. The market rate of interest at the time of the sale was 3%.
2. On December 31, 2017, Diane provided services to a customer in exchange for a $50,000, 3% note receivable. Diane will collect the note principal in full on December 31, 2019. Diane will collect interest on the note every December 31 starting December 31, 2018. The market rate of interest at the time of the sale was 3.5%.
3. During 2017, Diane declared and distributed a cash dividend.
4. During 2017, Diane issued, in exchange for cash, 40,000 additional shares of her common stock.
5. During 2017, Diane both borrowed on a long-term basis and paid back some long-term debt. During 2017, Diane borrowed $200,000.
6. During 2017, Diane both bought and sold some PP&E. Diane uses the straight-line depreciation method on all of its PP&E items and calculates depreciation to the nearest full-month. Diane assumes a $0 salvage value on each PP&E item. Diane’s PP&E sales related to two items:
a. A machine. Diane purchased the machine on 07-01-11 for $30,000. The machine had a 10-year useful life. Diane sold the machine on 10-31-17 for $6,000.
b. A building. When Diane purchased the building, she paid $140,000. Diane sold the building for $90,000. As a result of the sale, Diane recorded a gain of $20,000.
7. On August 15, 2017, Diane spent $750 on one of its PP&E items. The expenditure increased the asset’s useful life.
8. On April 25, 2017, Diane spent $2,500 on one of its PP&E items. The expenditure improved the asset’s efficiency.
9. During 2017, Diane did NOT enter into any non-cash investing or financing activities.
Prepare Diane’s Statement of Cash Flows (in good form) for the year ended December 31, 2017. Diane uses the indirect method.
Explanation / Answer
Cash Flow Statement for the year ended December 31, 2017
Particulars Amount ($) Amount ($)
Cash Balance as on December 31, 2016 (or January 01, 2017) 450,000
Add: Cash Inflow from Operating Activities-
Service Revenues $1,400,000
Accounts Receivable (290,125+100,000+50,000-390,000) $50,125
-Other revenues and gains/losses, net $17,828 1,467,953
Add: Cash Inflow from Financing Activities-
Issue of Common Stock Shares $40,000
Additional Paid in Capital $300,000
Long Term Debt $200,000 540,000
Add: Cash Inflow from Investng Activities-
Sale of Machine $6,000
Sale of Building $90,000 96,000 2,103,953
Total 2,553,953
Less: Cash Outflow from Operating Activities-
Selling, general, and administrative expenses $970,000
Interest expense $12,200
Income tax expense $118,628 1,100,828
Less: Cash Outflow from Financing Activities-
Repayment of Short Term Debt $10,000
Dividend Paid $353,325
Repayment of Long Term Debt $110,000 473,325
Less: Cash Outflow from Investing Activities-
Purchase of PPE {$715,000 - $560,200} $154,800
Expenditure to increase the useful life of PPE (Capitalized) Nil
Expenditure to increase the efficiency of PPE (Capitalized) Nil 154,800 1,728,953
Cash Balance as on December 31, 2017 825,000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.