Question

Given Information:          
Lincoln Corporation had no noncash investing and financing transactions for 2018. During the year, Lincoln sold equipment for $15,100, which had originally cost $12,700, with a book value of $10,700. Lincoln did not issue any notes payable during the year, but did issue common stock for $30,000. Note that the corporation's board of directors authorized the payment of dividends for the year.          
          
Lincoln Corporation          
Income Statement          
For the Period Ending December 31, 2018
          
Sales revenue $347,000
Cost of goods sold 78,000
Gross profit $269,000

Operating expenses:          
Salaries expense $26,500       
Depreciation expense 4,900       
Other operating expenses   12,500      43,900
Operating Income $225,100

Other incomes and expenses:          
Gain on Sale of equipment   $4,400       
Interest expense 9,900        5,500
Income before taxes $219,600
Income tax expense (36,600)
Net Income $183,000
          
          
          
Lincoln Corporation          
Balance Sheets          
          
Year ended December 31,      
Assets 2018       2017
Current Assets:          
Cash and cash equivalents $50,000        $23,500
Accounts receivable 32,100        29,100
Inventory 86,000 93,300
Prepaid insurance 3,300 2,800
Total current assets: $171,400        $148,700
Property, plant & equipment   153,000        136,000
Less: Accumulated depreciation(30,000)       (27,100)
Investments 113,000        -   
Total Assets $407,400        $257,600

Liabilities          
Current Liabilities:          
Accounts payable (Inventory purchases)   $33,200        $36,500
Salaries payable 2,900        7,400
Interest payable 2,400        -   
Taxes payable 5,300        -   
Other accrued operating expenses 18,800        22,100
Total current liabilities 62,600        66,000
Bonds Payable 78,000        113,000
Total Liabilities 140,600        179,000

Stockholders' Equity          
Common stock 107,000        77,000
Retained earnings 159,800        1,600
Total stockholders' equity 266,800        78,600
Total liabilites and equity $407,400        $257,600
          
Instructions: Prepare a statement of cash flows using the indirect method.           

Answer 1

Lincoln Corporation CASH FLOW STATEMENT FOR THE YEAR ENDED December 31, 2018
Cash flow from operating activity
Net income		183000
Adjustment to reconcile net income to cash flow
Depreciation expense	4900
Gain on Sale of equipment	(4400)
Increase in accounts receivable [32100-29100]	(3000)
Decrease in inventory	7300
Increase in prepaid insurance	(500)
Decrease in accounts payable	(3300)
Decrease in salaries payable	(4500)
increase in interest payable	2400
Increase in taxes payable	5300
Decrease in accrued operating expense	(3300)	900
Net cash flow from operating activity		183900
cash flow from investing activity
purchase of investment	(113000)
sale of equipment	15100
purchase of property plant and equipment (153000+12700-136000]	(29700)
cash flow from investing activity		(127600)
cash flow from financing activity
Repayment of bond payable	(35000)
Issue of common stock	30000
Dividend paid	((24800)
cash flow from financing activity		(29800)
Increase/(decrease ) in cash during the year		26500
Cash at beginning		23500
cash at end		50000