The income statement, balance sheets, and additional information for Video Phone
ID: 2577066 • Letter: T
Question
The income statement, balance sheets, and additional information for Video Phones, Inc., are provided.
Additional Information for 2018:
1. Purchase investment in bonds for $99,000.
2. Sell land costing $24,000 for only $16,600, resulting in a $7,400 loss on sale of land.
3. Purchase $54,000 in equipment by borrowing $54,000 with a note payable due in three years. No cash is exchanged in the transaction.
4. Declare and pay a cash dividend of $22,000.
Income Statement
For the Year Ended December 31, 2018 Net sales $ 2,696,000 Expenses: Cost of goods sold $ 1,650,000 Operating expenses 798,000 Depreciation expense 21,000 Loss on sale of land 7,400 Interest expense 12,000 Income tax expense 42,000 Total expenses 2,530,400 Net income $ 165,600 Required: Prepare the statement of cash flows using the indirect method. Disclose any noncash transactions in an accompanying note. (List cash outflows and any decrease in cash as negative amounts.) VIDEO PHONES, INC Statement of Cash Flows For the Year Ended December 31, 2018 Cash Flows from Operating Activities: Adjustments to reconcile net income to net cash flows from operating activities Net cash flows from operating activities Cash Flows from Investing Activities Net cash flows from investing activities
Explanation / Answer
VIDEO PHONES INC. Cash Flow Statement (Indirect Method) For the year ended December 31 2016 Particulars Amount $ Cash Flow from Operating Activities Net Income 165600 Adjustments Add: Depreciation & Amortisation 21000 Loss on sales of Land 7400 Decreasing in Inventory 24000 Increase in Accounts Receivable -20400 Increasing in Prepaid expenses -4680 Decrease in Accounts Payable -14400 Decrease in Interest payable -3400 Increase in Income tax payable 1000 Total Cash Flow from Operating Activities 176120 Cash flows from investing activities Purchase of Investment -99000 Proceeds from sale of Land 16,600 Net cash used in investing activities -82,400 Cash flows from financing activities Dividend paid -22,000 Net cash used in financing activities -22,000 Net increase in cash and cash equivalents 71,720 Cash and cash equivalents at beginning of period 94,320 Cash and cash equivalents at end of period $1,66,040
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