oInts Erika Company. a major retailer of bicycles and accessories, operates seve

Question

oInts Erika Company. a major retailer of bicycles and accessories, operates several stores and is a publicly traded company. The comparative balance sheet and income statement for Erika as of May 31, 2016, are as follows The company is preparing its statement of cash flows. Erika Company Comparative Balance Sheets As of May 31 2016 2015 $28,250 20,000o Accounts receivable 75,000$ 58,000 $ 220,000 250,000 7,000 $332,250 $ 335,000 Cash Inventory Prepaid Expenses $9,000 S Plant assets Less: A/D $ 600,000$ 502,000 $ 150,000125,000 $ 450,000 $ Total Assets $782,250 $ 712,000 Accounts payable 123,000 115,000 $47,250 $ 72,000 Interest payable 27000 $ 25,000 $ 197,250$ 212,000 Wages payable Bonds payable $ 70,000 100,000 Common Stock, $10 par 370,000 $ 280,000 $ 145,000 120,000 Retained Earnings $ 515,000400,000 $ 782,250 712.000 Total Liab & Equity

Explanation / Answer

Note: Common stock issued against purchase of plant assets is not shown in the cash flow statement since it is a non-cash transaction.

Erika Company Cash Flow Statement For the Year Ended May 31, 2016 Cash flow from Operating activities: Net Income $ 130000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 25000 Increase in Accounts receivable -17000 Decrease in Inventory 30000 Increase in prepaid expenses -2000 Increase in Accounts payable 8000 Decrease in wages payable -24750 Increase in interest payable 2000 21250 Net cash provided by operating activities 151250 Investing activities: Purchase of plant assets -28000 Net cash used by investing activities -28000 Financing activities: Repayment of bonds payable -30000 Issuance of common stock 20000 Dividends paid -105000 Net cash used by financing activities -115000 Net increase in cash 8250 Beginning cash balance 20000 Ending cash balance $ 28250

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