Question

Comparative balance sheet accounts of Pina Company are presented below. PINA COMPANY COMPARATIVE BALANCE SHEET ACCOUNTS AS OF DECEMBER 31 Debit Balances 2017 2016 Cash $69,500 $50,900 Accounts Receivable 153,400 131,000 Inventory 75,300 60,900 Debt investments (available-for-sale) 54,800 85,600 Equipment 70,300 48,300 Buildings 143,900 143,900 Land 40,000 24,900 Totals $607,200 $545,500 Credit Balances Allowance for Doubtful Accounts $10,100 $7,900 Accumulated Depreciation—Equipment 20,800 14,000 Accumulated Depreciation—Buildings 36,900 27,700 Accounts Payable 66,500 59,600 Income Taxes Payable 11,900 10,100 Long-Term Notes Payable 62,000 70,000 Common Stock 310,000 260,000 Retained Earnings 89,000 96,200 Totals $607,200 $545,500

Additional data: 1. Equipment that cost $10,000 and was 60% depreciated was sold in 2017. 2. Cash dividends were declared and paid during the year. 3. Common stock was issued in exchange for land. 4. Investments that cost $34,700 were sold during the year. 5. There were no write-offs of uncollectible accounts during the year. Pina’s 2017 income statement is as follows. Sales revenue $946,900 Less: Cost of goods sold 602,300 Gross profit 344,600 Less: Operating expenses (includes depreciation expense and bad debt expense) 248,400 Income from operations 96,200 Other revenues and expenses Gain on sale of investments $14,900 Loss on sale of equipment (3,000 ) 11,900 Income before taxes 108,100 Income taxes 45,100 Net income $63,000

(a) Compute net cash provided by operating activities under the direct method. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net cash flow from operating activities $

(b) Prepare a statement of cash flows using the indirect method.

Answer 1

STATEMENT OF CASH FLOWS (INDIRECT METHOD)
Cash flows from operating activities:
Net income		$     63,000
Adjustments to net income to net cash provided by operating activities:
Depreciation Expense-Equipment [20800-14000+6000]	$       12,800
Depreciation Expense-Building [36900-27700]	$          9,200
Gain on sale of investments	$      -14,900
Loss on sale of equipment	$          3,000
Increase in accounts receivable (153400-10100-131000+7900)	$      -20,200
Increase in inventory =75300-60900 =	$      -14,400
Increase in accounts payable = 66500-59600 =	$          6,900
Decrease in income tax payable = 11900-10100 =	$          1,800	$   -15,800
Net cash provided by operating activities		$     47,200
Cash flows from investing activities:
Purchase of investments (available for sale) = 54800-85600+34700 =	$        -3,900
Sale of investments (available for sale)=34700+14900 =	$       49,600
Purchase of equipment = 70300-48300+10000 =	$      -32,000
Sale of equipment = 4000-3000 =	$          1,000
Net cash used for investing activities		$     14,700
Cash flows from financing activities:
Redemption of long term notes payable =70000-62000 =	$        -8,000
Issuance of common stock =310000-260000-15100 =	$       34,900
Payment of cash dividends =96200-89000+63000 =	$      -70,200
Net cash provided by financing activities		$   -43,300
Net increase in cash		$     18,600
Beginning cash balance		$     50,900
Ending cash balance		$     69,500
Non-cash transactions:
Issue of common stock for purchase of land	$       15,100
STATEMENT OF CASH FLOWS (DIRECT METHOD)
Cash flow from operating activities:
Collections from customers (946900+131000-153400)	924500
Payments to suppliers (602300+59600-66500+75300-60900)	-609800
Operating expenses paid (248400-22000-2200)	-224200
Income tax paid (45100+10100-11900)	-43300
Net cash provided by operating activities		47200