Exercise 5-16 A comparative balance sheet for Cullumber Corporation is presented

Question

Exercise 5-16 A comparative balance sheet for Cullumber Corporation is presented below December 31 2017 Assets Cash Accounts receivable Inventory Land Equipment Accumulated Depreciation-Equipment 2016 $ 72,760 22,000 83,040 181,040 72,040 261,040 (70,040) (43,280 ) 67,280 190,280 111,280 201,280 $599,880$548,840 Total Liabilities and Stockholders' Equity Accounts payable Bonds payable Common stock ($1 par) Retained earnings $ 35,040$48,280 200,000 164,000 136,560 $599,880$548,840 150,000 214,000 200,840 Total Additional information: 1. Net income for 2017 was $127,080. No gains or losses were recorded in 2017. 2. Cash dividends of $62,800 were declared and paid. 3. Bonds payable amounting to $50,000 were retired through issuance of common stock.

Explanation / Answer

Par value of the shares are $1. so need to Issue 50,000 shares to retire bonds.

CULLUMBER CORPORATION Cash Flow Statement For year ended 31 December 2017 Cash flows from operating activities Net Income $ 127,080 Adjustment to reconcile net income to: Depreciation expense $   26,760 $70,040-$43,280 Changes in current operating assets and liabilities Increase in accounts receivable $ (15,760) Decrease in inventory $      9,240 Decrease in accounts payable $ (13,240) $      7,000 Net cash provided by operating activities $ 134,080 Cash flows from investing activities Proceeds from sale of land $   39,240 Purchase of equipment $ (59,760) Net cash used by investing activities $ (20,520) Cash flows from financing activities Dividend paid $ (62,800) Net cash used by financing activities $ (62,800) Net increase in cash and cash equivalents $    50,760 Cash and cash equivalents at beginning of period $    22,000 Cash and cash equivalents at end of period $    72,760 Non cash investing and financing activities Conversion of bonds into common stock $    50,000

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