Problem 232 The comparative balance sheets for Sunland Corpo

Problem 23-2 The comparative balance sheets for Sunland Corporation show the following information. December 31 2017 2016 Cash Accounts receivable Inventory Available-for-sale debt investments Buildings Equipment Patents $33,200 $13,000 12,200 10,100 8,900 2,900 030,100 45,300 20,200 6,300 $107,800 $91,500 12,100 -0 5,000 Allowance for doubtful accounts Accumulated depreciation-equipment Accumulated depreciation-building Accounts payable Dividends payable Notes payable, short-term (nontrade) Long-term notes payable Common stock Retained earnings $3,000 $4,500 4,500 6,000 2,900 5,000 4,000 31,000 25,000 43,000 33,000 6,600 $107,800 $91,500 2,000 5,000 -0 3,000 20,800 Additional data related to 2017 are as follows 1. Equipment that had cost $11,000 and was 40% depreciated at time of disposal was sold for $2,500. 2. $10,000 of the long-term note payable was paid by issuing common stock. 3. Cash dividends paid were $5,000 4. On January 1, 2017, the building was completely destroyed by a flood. Insurance proceeds on the building were $30,300 (net of $2,000 taxes) 5. Investments (available-for-sale) were sold at $1,700 above their cost. The company has made similar sales and investments in the past. 6. Cash was paid for the acquisition of equipment.

Solution

Cash flow indirect method Cash flow from operating activities Retained earnings difference 14200 Adjustments to reconcile the net income Dividend 5000 Depreciation expense 1900 Loss on sale of equipment 4100 Gain on sale of building -6200 Interest 2000 Gain on sale of investment -1700 Patents amortized 1300 Changes in current asset and liabilities Increase in accounts receivable -3600 Increase in Inventory -3200 Increase in accounts payable 2100 Decrease in dividend payable -5000 Increase in notes payable -1000 -4300 Cash flow from operating activities 9900 Cash flow from Investing activities Sale of equipment 2500 Sale of investment 4600 Purchase of Equipment -20100 Sales of Building 30300 Cash flow from Investing activities 17300 Cash flow from Financing activities Interest paid -2000 Divided paid -5000 Cash flow from Financing activities -7000 Net Cash and cash equivalent 20200 Add Beginning cash and cash equivalent 13000 Ending cash and cash equivalent 33200