In: Accounting
Golden Corp., a merchandiser, recently completed its 2017
operations. For the year, (1) all sales are credit sales, (2) all
credits to Accounts Receivable reflect cash receipts from
customers, (3) all purchases of inventory are on credit, (4) all
debits to Accounts Payable reflect cash payments for inventory, (5)
Other Expenses are all cash expenses, and (6) any change in Income
Taxes Payable reflects the accrual and cash payment of taxes. The
company’s balance sheets and income statement follow.
GOLDEN CORPORATION |
|||||||
2017 |
2016 |
||||||
Assets |
|||||||
Cash |
$ |
179,000 |
$ |
123,500 |
|||
Accounts receivable |
105,500 |
86,000 |
|||||
Inventory |
623,500 |
541,000 |
|||||
Total current assets |
908,000 |
750,500 |
|||||
Equipment |
375,400 |
314,000 |
|||||
Accum. depreciation—Equipment |
(165,500 |
) |
(111,500 |
) |
|||
Total assets |
$ |
1,117,900 |
$ |
953,000 |
|||
Liabilities and Equity |
|||||||
Accounts payable |
$ |
117,000 |
$ |
86,000 |
|||
Income taxes payable |
43,000 |
32,600 |
|||||
Total current liabilities |
160,000 |
118,600 |
|||||
Equity |
|||||||
Common stock, $2 par value |
622,000 |
583,000 |
|||||
Paid-in capital in excess of par value, common stock |
211,000 |
182,500 |
|||||
Retained earnings |
124,900 |
68,900 |
|||||
Total liabilities and equity |
$ |
1,117,900 |
$ |
953,000 |
|||
GOLDEN CORPORATION |
|||||
Sales |
$ |
1,867,000 |
|||
Cost of goods sold |
1,101,000 |
||||
Gross profit |
766,000 |
||||
Operating expenses |
|||||
Depreciation expense |
$ |
54,000 |
|||
Other expenses |
509,000 |
563,000 |
|||
Income before taxes |
203,000 |
||||
Income taxes expense |
43,000 |
||||
Net income |
$ |
160,000 |
|||
Additional Information on Year 2017 Transactions
Required:
Prepare a complete statement of cash flows; report its cash flows
from operating activities according to the direct method.
(Amounts to be deducted should be indicated with a minus
sign.)
Solution
Statement of cash flow(direct method)
Cash flow from operating activities: | ||
Cash received from customers (1) | $1,847,500 | |
Cash paid for merchandise(2) | $(1,152,500) | |
Cash paid for other expenses (3) | $(509,000) | |
Cash paid for income taxes(4) | $(32,600) | |
Net cash provided by operating activities | $153,400 | |
Cash flow from investing activities: | ||
Cash paid for equipment | $(61,400) | |
Net cash used in investing activities | $(61,400) | |
Cash flow from financing activities: | ||
Cash received from stock issuance | $67,500 | |
Cash paid for cash dividends | $(104,000) | |
Net cash used in financing activities | $(36,500) | |
Net increase (decrease) in cash | $55,500 | |
Cash balance at beginning of year | $123,500 | |
Cash balance at end of year | $179,000 | |
(1) Sales-increase in receivables
=$1,867,000-($105,500-$86,000)
=$1,847,500
(2) cost of good sold+increase in inventory-increase in payables
=$1,101,000+($623,500-$541,000) -($117,000-$86,000)
=$1,152,500
(3) operating expenses other than depreciation
=$509,000
(4) income taxes expense -increase in income tax payable
=$43,000-($43,000-$32,600)
=$32,600