Question One Lock Key Inc began operations on January 1 201

Question One Lock & Key Inc. began operations on January 1, 2016. Its post-closing trial balance at December 31, 2016, and 2017 is shown below along with some other information. Lock & Key Inc. Income Statement For Year Ended December 31, 2017 (000s) Lock & Key Inc. Post-Closing Trial Balance (000s) December 31- 2017 2016 Revenues: Account asan. $2,160 $1,260 Recevables. 2,100 1,440 Merchandise inventory2,040 2,280 Property, plant, and equipment.... 3,720 3,960 Accumulated depreclation. 1,440 1,380 Accounts payable. 1,440 1,080 Accrued llabilities.. Bonds payable 1,680 1,800 Common shares... Retained earnings... Sales 3,300 Cash. Cost of goods sold.. Gross Profit.uca 780 Expenses: Other expenses. Depreciation epens.240 Total expenses. 660 240 360 Lossu 3,084 ...2,136 2,040 2,280 Other information regarding Lock & Key Inc. and its activities during 2017 1. Assume all accounts have normal balances. 2. Cash dividends were declared and paid during the year. 3. Equipment was sold for cash equal to its book value. Using the information provided, prepare a statement of cash flows (applying the indirect method) for the year ended December 31, 2017

Solution

Lock & Key , Inc. Statement of cash flow for the year ended December 31, 2017 Cash flow from operating activities    Net income -120     Adjustments for non-cash items       Depreciation expense 240      Adjustments for changes in working capital       Increase in accounts receivable -660       Decrease in inventory 240       Increase in accounts payable 360       Decrease in accrued liabilities -120 60 Net cash flow from (used in) operating activities -60 Cash flow from investing activities    Sale of equipment * 60 Net cash flow from (used in) investing activities 60 Cash flow from financing activities     Retirement of bonds payable (1,680 - 1,800) -120      Issue of common stock (3,084 - 2,040) 1044      Dividends paid ** -24 Net cash flow from (used in) financing activities 900 Net cash flow 900 Beginning cash balance 1260 Ending cash balance 2160 Beginning accumulated depreciaion 1380 Depreciation expense for the year 240 Total 1620 Ending accumulated depreciation -1440 Depreciation on the equipment sold (1) 180 Beginning property, plant and equipment 3960 Ending property,plant and equipment -3720 Cost of equipment sold 240 Depreciation on the equipment sold (1) -180 Book value of the equipment sold 60 Cash received on the sale of equipment * 60 Beginning retained earnings 2280 Net income for the year -120 cash paid for new investments made 2160 Ending retained earnings -2136 Cash dividends paid ** 24