Exercise 17-8 Here are comparative balance sheets for Velo Company. VELO COMPANY

Question

Exercise 17-8 Here are comparative balance sheets for Velo Company. VELO COMPANY Comparative Balance Sheets December 31 Assets 2017 2016 Cash $73,000 $33,400 Accounts receivable 85,600 70,900 Inventory 170,000 186,900 Land 73,000 101,700 Equipment 260,700 200,800 Accumulated depreciation—equipment (66,000 ) (33,700 ) Total $596,300 $560,000 Liabilities and Stockholders’ Equity Accounts payable $35,300 $47,100 Bonds payable 149,000 203,200 Common stock ($1 par) 216,300 172,000 Retained earnings 195,700 137,700 Total $596,300 $560,000 Additional information: 1. Net income for 2017 was $104,300. 2. Cash dividends of $46,300 were declared and paid. 3. Bonds payable amounting to $54,200 were redeemed for cash $54,200. 4. Common stock was issued for $44,300 cash. 5. No equipment was sold during 2017, but land was sold at cost. Prepare a statement of cash flows for 2017 using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000, or in parenthesis e.g. (15,000).) VELO COMPANY Statement of Cash Flows $ 104300 Adjustments to reconcile net income to $ $

Explanation / Answer

The following is the cash flow statement of Velo company:

Cash flow from operating activities Net Income $104,300 Adjustments to reconcille net income Depreciation expense (difference in accumulated depreciatiion of both the years) (66,000 - 33,700) $32,300 Increase in accounts receivable (85,600 - 70,900) (14,700) Decrease in inventory (170,000 - 186,900) 16,900 Decrease in accounts payable (35,300 - 47,100) (11,800) 22,700 Net cash fprovided by operating activities $127,000 Cash flow from investing activities Sale of land (101,700 - 73,000) 28,700 Purchase of equipment (260,700 - 200,800) (59,900) Net cash used by investing activities (31,200) Cash from financing activities Issuance of common stock $44,300 Payment of dividends (46,300) redemption of bonds (54,200) Net cash used by financing activities (56,200) Net increase in cash 39,600 Add: opening cash balance 33,400 Cash at the end of 2017 $73,000

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