Question

Maroon Six Inc. had the balance sheet shown below at December 31, 2016.

MAROON SIX INC.

BALANCE SHEET

DECEMBER 31, 2016

Cash                                        $ 31,000         Accounts payable                   $ 61,000            

Accounts receivable               $ 56,800          Notes payable (long-term)       $76,000

Investments                            $ 86,000          Common stock                        $200,000

Plant assets (net)                     $138,500         Retained earnings                   $41,300

Land                                        $ 66,000

Total               $378,300 Total                                       $378,300

During 2017, the following occurred.

1. Maroon Six Inc. sold part of its investment portfolio for $20,000. This transaction resulted in a loss of $2,100 for the firm. The company classifies its investments as available-for-sale.

2. A tract of land was purchased for $25,000 cash.

3. Long-term notes payable in the amount of $30,000 were retired before maturity by paying $30,000 cash.

4. An additional $43,000 in common stock was issued at par.

5. Dividends of $20,000 were declared and paid to stockholders.

6. Net income for 2017 was $21,000 after allowing for depreciation of $9,000.

7. Land was purchased through the issuance of $61,000 in bonds payable.

8. At December 31, 2017, Cash was $46,100, Accounts Receivable was $61,800, and Accounts Payable remained at $61,000.

Prepare a statement of cash flows for 2017.

Answer 1

MAROON SIX INC.
Statement of Cash Flows
December 31, 2017
Cash flows from operating activities
Net Income		21,000
Adjustments to reconcile net income to
Net cash flow from operating activities:
Depreciation expense	9,000
Loss on sale of investment	2,100
Increase in accounts receivable	(5,000)	6,100
Net Cash provided by operating activities		27,100
Cash Flow from Investing Activities
Sale of investment	20,000
Purchase of land	(25,000)
Net cash used by investing activities		(5,000)
Cash Flow from Financing Activities
Issuance of common stock	43,000
Retirement of notes payable	(30,000)
Payment of cash dividends	(20,000)
Net cash used by financing activities:		(7,000)
Net increase/decrease in cash held		15,100
Cash at the beginning of the year		31,000
Cash at the end of the year		46,100