Homework P17-6C Presented below are the financial statements of Josten Company.

Question

Homework P17-6C Presented below are the financial statements of Josten Company. JOSTEN COMPANY Comparative Balance Sheets December 31 Assets Cash Accounts receivable 2017 24,000 25,000 41,000 2016 33,000 14,000 25,000 Property, plant, and equipment Accumulated depreciation $69,000 $78,000 (26.000) 43,000 (24.000) 54,000 $126,000 Total $133,000 Liabilities and Stockholders' Equity Accounts payable Income taxes payable Bonds payable Common stock Retained carnings 30,000 25,000 20,000 25,000 33,000 43,000 20,000 10,000 25,000 28,000 $126,000 Total $133,000 Income Statement For the Year Ended December 31, 2017 Sales revenue Cost of goods sold Gross profit Selling expenses Administrative expenses Income from operations Interest expense Income before income taxes Income tax expense Net income $281,000 204,000 77,000 37,000 40,000 5,000 35,000 10,000 25,000 $28,000 9,000 Additional data: 1. Dividends of $20,000 were declared and paid. 2. During the year equipment was sold for $12,000 cash. This equipment cost $15,000 originally and had a book value of $12,000 at the time of sale. 3. All depreciation expense, $5,000, is in the selling expense category 4. All sales and purchases are on account. 5. Additional equipment was purchased for $6,000 cash. Instructions (a) Prepare a statement of cash flows using the indirect method.

Explanation / Answer

Cashflow from operating activities Net profit before tax 35000 Add:Depreciation 5000 Add:Interest on bond 5000 Cashflow from operations 45000 Add/less:Change in current assets and liabilities Increase in recievables -11000 Increase in inventory -16000 Decrease in payable -13000 Increase in income tax payable 5000 Income tax paid -10000 CASHFLOW FROM OPERATIONS 0 Cashflow from Investing activities Sale of fixed assets 12000 (no profit no loss) Purchase of fixed asset -6000 CASHFLOW FROM INVESTING 6000 Cashflow from Financing activities Bonds 10000 Interest paid -5000 Dividend paid -20000 CASHFLOW FROM FINANCING -15000 Net cashflow -9000 Opening cash 33000 Net closing balance 24000

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