Given below are the 20X2 income statement, the 20X2 and 20X1 comparative balance

Question

Given below are the 20X2 income statement, the 20X2 and 20X1 comparative balance sheets and a partially completed 20x2 Statement of Cash Flows for Pony Company Use these documents, along with the Additional information which immediately follows the income statement to help you answer the 7 questions which follow [assume all transactions were for cash) Remember to use the 3 steps you were given with respect to preparing the operating activities section' using the indirect method Pony Company income Statement For the Year Ended December 31, 20X2 Sales 3220,000 COGS Gross Profit 98,000 Depreciation Expense (14.000) Other Operating Expenses Income from Operations 46,000 Gain on Sale of Equipment 2.000 Loss on Sale of Investments (3,000) Interest Expense Income before Taxes $43,800 Income Tax Expense et Income

Explanation / Answer

Answer 1. Pony Company Statement of Cash Flows (Indirect Method) For the Year ended Dec 31, 20X2 Cash Flow from opearating activities: Net Income        35,000.00 Add/(Less) non cash effects on operating activities Depreciation expense        14,000.00 Gain on Sale of Equipment        (2,000.00) Loss on Sale of Investments          3,000.00 Decrease in Accounts Receivables          2,000.00 Decrease in Inventory          6,600.00 Increase in Prepaid Expenses           (700.00) Decrease in Accounts Payables     (24,600.00) Increase in Accrued Liabilities              200.00        (1,500.00) Net Cash provided by operating activities        33,500.00 Cash flow from Investing Activities Purchase of Building     (80,000.00) Sale of Equipment          8,000.00 Sale of Long Term Investments          7,000.00 Cash Flow / (used) from Investing activities     (65,000.00) Cash Flow from Financing Activities Payment of Long Term Debt     (30,000.00) Issue of Notes Payable        20,000.00 Issue of Preferred Stock at Premium        45,000.00 Cash dividend paid        (3,500.00) Purchase of Treasury stock        (7,000.00) Cash Flow from Financing Activities        24,500.00 Net Increase / (Decrease) in Cash        (7,000.00) Cash balance at the beginning        32,800.00 Cash balance at the end        25,800.00 Answer 2. X (the change in Cash) = ($7,000) Answer 3. Depreciation expense        14,000.00 Gain on Sale of Equipment        (2,000.00) Loss on Sale of Investments          3,000.00 Total Of Step 2        15,000.00 Answer 4. Amount of H (related to Inventory) = $6,600 Answer 5. L (Total of step 3 Adjustments Decrease in Accounts Receivables          2,000.00 Decrease in Inventory          6,600.00 Increase in Prepaid Expenses           (700.00) Decrease in Accounts Payables     (24,600.00) Increase in Accrued Liabilities              200.00 L (Total of step 3 Adjustments     (16,500.00) Answer 6. Proceeds (cash) Received from Long Term Invetments: Book Value of Long Term Investments        10,000.00 Loss on Sale of Investments        (3,000.00) Cash Recd from Sale of LT Invetsments          7,000.00 Answer 7. Cash flow from Investing Activities Purchase of Building     (80,000.00) Sale of Equipment          8,000.00 Sale of Long Term Investments          7,000.00 Cash Flow / (used) from Investing activities     (65,000.00) Answer 8. Cash Flow from Financing Activities Payment of Long Term Debt     (30,000.00) Issue of Notes Payable        20,000.00 Issue of Preferred Stock at Premium        45,000.00 Cash dividend paid        (3,500.00) Purchase of Treasury stock        (7,000.00) Cash Flow from Financing Activities        24,500.00

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