Shamrock Co. reported $157,600 of net income for 2017. The accountant, in prepar

Question

Shamrock Co. reported $157,600 of net income for 2017. The accountant, in preparing the statement of cash flows, noted the following items occurring during 2017 that might affect cash flows from operating activities.

Prepare a schedule that shows the net cash flow from operating activities using the indirect method. Assume no items other than those listed above affected the computation of 2017 net cash flow from operating activities. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

1. Shamrock purchased 100 shares of treasury stock at a cost of $20 per share. These shares were then resold at $25 per share. 2. Shamrock sold 100 shares of IBM common at $180 per share. The acquisition cost of these shares was $160 per share. There were no unrealized gains or losses recorded on this investment in 2017. 3. Shamrock revised its estimate for bad debts. Before 2017, Shamrock’s bad debt expense was 1% of its net sales. In 2017, this percentage was increased to 2%. Net sales for 2017 were $538,600, and net accounts receivable decreased by $11,700 during 2017. 4. Shamrock issued 500 shares of its $10 par common stock for a patent. The market price of the shares on the date of the transaction was $23 per share. 5. Depreciation expense is $38,500. 6. Shamrock Co. holds 40% of the Nirvana Company’s common stock as a long-term investment. Nirvana Company reported $24,300 of net income for 2017. 7. Nirvana Company paid a total of $2,200 of cash dividends to all investees in 2017. 8. Shamrock declared a 10% stock dividend. One thousand shares of $10 par common stock were distributed. The market price at date of issuance was $20 per share.

Explanation / Answer

Statement of cash flow Particulars Amount Net income              1,57,600 Adjustments to reconcile net income: Depreciation                 38,500 Investment income                  (9,720) Bad debt expense                   5,152 Loss/(gain) on sale of investment                  (2,000) Working capital changes: (Increase)/Decrease in accounts receivables                 11,700 Cash generated from operations              2,01,232

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