Question

Spreadsheet and Statement of Cash Flows

The following information was taken from Lamberson Company's accounting records:

	Account Balances
Account Titles	January 1, 2016	December 31, 2016
Debits
Cash	$ 1,400	$ 2,400
Accounts Receivable (net)	2,800	2,690
Marketable Securities (at cost)	1,700	3,000
Allowance for Change in Value	500	800
Inventories	8,100	7,910
Prepaid Items	1,300	1,710
Investments (long-term)	7,000	5,400
Land	15,000	15,000
Buildings and Equipment	32,000	46,200
Discount on Bonds Payable	—	290
	$69,800	$85,400
Credits
Accumulated Depreciation	$16,000	$16,400
Accounts Payable	3,800	4,150
Income Taxes Payable	2,400	2,504
Wages Payable	1,100	650
Interest Payable	—	400
Note Payable (long-term)	3,500	—
12% Bonds Payable	—	10,000
Deferred Taxes Payable	800	1,196
Convertible Preferred Stock, $100 par	9,000	—
Common Stock, $10 par	14,000	21,500
Additional Paid-in Capital	8,700	13,700
Unrealized Increase in Value of Marketable Securities	500	800
Retained Earnings	10,000	14,100
	$69,800	$85,400

Additional information for the year:

a.      

Sales		$ 39,930
Cost of goods sold		(19,890)
Depreciation expense		(2,100)
Wages expense		(11,000)
Other operating expenses		(1,000)
Bond interest expense		(410)
Dividend revenue		820
Gain on sale of investments		700
Loss on sale of equipment		(200)
Income tax expense		(2,050)
Net income		$ 4,800

b.     Dividends declared and paid totaled $700.

c.     On January 1, 2016, convertible preferred stock that had originally been issued at par value were converted into 500 shares of common stock. The book value method was used to account for the conversion.

d.     Long-term nonmarketable investments that cost $1,600 were sold for $2,300.

e.     The long-term note payable was paid by issuing 250 shares of common stock at the beginning of the year.

f.      Equipment with a cost of $2,000 and a book value of $300 was sold for $100. The company uses one Accumulated Depreciation account for all depreciable assets.

g.     Equipment was purchased at a cost of $16,200.

h.     The 12% bonds payable were issued on August 31, 2016, at 97. They mature on August 31, 2026. The company uses the straight-line method to amortize the discount.

i.       Taxable income was less than pretax accounting income, resulting in a $396 increase in deferred taxes payable.

j.      Short-term marketable securities were purchased at a cost of $1,300. The portfolio was increased by $300 to a $3,800 fair value at year-end by adjusting the related allowance account.

Required

1.     Prepare a spreadsheet to support Lamberson Company's 2016 statement of cash flows. Use the minus sign to indicate cash outflows, a decrease in cash or cash payments.

1.     Prepare the statement of cash flows.

LAMBERSON COMPANY Statement of Cash Flows For Year Ended December 31, 2016
Operating Activities:
Net income	$
Adjustment for noncash income items:
Add: Depreciation expense
Add: Bond discount amortization
Add: Loss on sale of equipment
Add: Increase in deferred taxes payable
Less: Gain on sale of investments
Adjustments for cash flow effects from working capital items:
Decrease in accounts receivable
Decrease in inventories
Increase in prepaid items
Increase in accounts payable
Decrease in wages payable
Increase in income taxes payable
Increase in interest payable
Net cash provided by operating activities		$
Investing Activities:
Payment for purchase of short-term marketable securities	$
Proceeds from sale of long-term investments
Proceeds from sale of equipment
Payment for purchase of equipment
Net cash used for investing activities
Financing Activities:
Proceeds from issuance of 12% bonds	$
Payment of dividends
Net cash provided by financing activities
Net increase in cash		$
Cash, January 1, 2016
Cash, December 31, 2016		$

2. Compute the cash flow from operations to sales ratio and the profit margin ratio for 2016. Round your answers to one decimal place.

a.     Cash flows from operations ratio :%

b.     Profit margin:  %

Answer 1

Answer 1: Cash Flow Statement in Spread sheet

LAMBERSON COMPANY
Statement of Cash Flows
For Year Ended December 31, 2016
Operating Activities:	$	$
Net income	4,800
Adjustment for noncash income items:
Add: Depreciation expense	2,100
Add: Bond discount amortization	10
Add: Loss on sale of equipment	200
Add: Increase in deferred taxes payable	396
Less: Gain on sale of investments	-700
Adjustments for cash flow effects from working capital items:
Add: Decrease in accounts receivable	110
Decrease in inventories	190
Increase in accounts payable	350
Increase in interest payable	400
Increase in income taxes payable	104
Less: Increase in prepaid items	-410
Decrease in wages payable	-450
Net cash provided by operating activities		$7,100
Investing Activities:
Add: Proceeds from sale of equipment	100
Proceeds from sale of long-term investments	2,300
Less: Payment for purchase of short-term marketable securities	-1300
Payment for purchase of equipment	-16,200
Net cash used for investing activities	$	$ -15100
Financing Activities:
Proceeds from issuance of 12% bonds	9,700
Payment of dividends	-700
Net cash provided by financing activities		9,000
Net increase in cash		1,000
Add: Cash, January 1, 2016		1,400
Cash, December 31, 2016		$2,400

Answer 2:

a) Cash from operation to Slaes Ratio = Cash from operation ÷ Slaes 100

= $7,100 ÷ $39,930 100 = 17.8 %

b) Profit Margin Ratio = Net Income ÷ Net Slaes

= $4,800 ÷ $39,930 = 0.1202 =12.02 =12%