Homework SourseThe comparative balance sheets of Posner Company for Years 1
The comparative balance sheets of Posner Company, for Years 1 and 2 ended December 31, appear below in condensed form.
1
Year 2
Year 1
2
Cash
$53,000.00
$50,000.00
3
Accounts Receivable (net)
37,000.00
48,000.00
4
Inventories
108,500.00
100,000.00
5
Investments
70,000.00
6
Equipment
573,200.00
450,000.00
7
Accumulated Depreciation-Equipment
(142,000.00)
(176,000.00)
8
$629,700.00
$542,000.00
9
Accounts Payable
$62,500.00
$43,800.00
10
Bonds Payable, Due Year 2
100,000.00
11
Common Stock, $10 par
325,000.00
285,000.00
12
Paid-In Capital in Excess of Par—Common Stock
80,000.00
55,000.00
13
Retained Earnings
162,200.00
58,200.00
14
$629,700.00
$542,000.00
The income statement for the current year is as follows:
1
Sales
$625,700.00
2
Cost of merchandise sold
340,000.00
3
Gross profit
$285,700.00
4
Operating expenses:
5
Depreciation expense
$26,000.00
6
Other operating expenses
68,000.00
94,000.00
7
Income from operations
$191,700.00
8
Other revenue and expense:
9
Gain on sale of investment
$4,000.00
10
Interest expense
(6,000.00)
(2,000.00)
11
Income before income tax
$189,700.00
12
Income tax
60,700.00
13
Net income
$129,000.00
Additional data for the current year are as follows:
Required:
Prepare a statement of cash flows using the indirect method of reporting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.
Prepare a statement of cash flows using the indirect method of reporting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.
Posner Company
Statement of Cash Flows
1
Cash flows from operating activities:
2
3
Adjustments to reconcile net income to net cash flow from operating activities:
4
5
6
Changes in current operating assets and liabilities:
7
8
9
10
11
Cash flows from investing activities:
12
13
14
15
Cash flows from financing activities:
16
17
18
19
20
21
Cash at the beginning of the year
22
Cash at the end of the year
| 1 | Year 2 | Year 1 | |
| 2 | Cash | $53,000.00 | $50,000.00 |
| 3 | Accounts Receivable (net) | 37,000.00 | 48,000.00 |
| 4 | Inventories | 108,500.00 | 100,000.00 |
| 5 | Investments | 70,000.00 | |
| 6 | Equipment | 573,200.00 | 450,000.00 |
| 7 | Accumulated Depreciation-Equipment | (142,000.00) | (176,000.00) |
| 8 | $629,700.00 | $542,000.00 | |
| 9 | Accounts Payable | $62,500.00 | $43,800.00 |
| 10 | Bonds Payable, Due Year 2 | 100,000.00 | |
| 11 | Common Stock, $10 par | 325,000.00 | 285,000.00 |
| 12 | Paid-In Capital in Excess of Par—Common Stock | 80,000.00 | 55,000.00 |
| 13 | Retained Earnings | 162,200.00 | 58,200.00 |
| 14 | $629,700.00 | $542,000.00 |
Solution
POSNER COMPANY Statement of cash flows for the year ending December 31, Year 2 Cash flow from operating activities Net income 129000 Adjustments to net cash flows : Depreciation expense 26000 Gain on sale of investment -4000 22000 Changes in current operting assets and liabilities Decrease in accounts receivable 11000 Increase in inventories -8500 Increase in accounts payable 18700 21200 Cash flow from operating activities 172200 Cash flow from investing activities Sale of investments (1) 74000 Purchase of equipment -183200 Cash flow from investing activities -109200 Cash flow from financing activities Retirement of bonds payable -100000 Issue of common stock 65000 Payment of dividends -25000 Cash flow from financing activities -60000 Net cash flow 3000 Beginning cash balance 50000 Ending Cash balance 53000 Cash receipt from sale of investments Beginning balance of investments 70000 Ending balance of investments 0 sale of investments 70000 Gain on sale of investments 4000 Cash received from sale of investments (1) 74000
