Question

Exercise 1 – Constructing the statement of cash flows:

You are the controller of the Frank Underwood Corporation. On January 1, 2018, after the 2017 fiscal year has ended, you have the following information in front of you:

	December 31,
Assets:	2017	2016
Cash	$4,947	$2,490
Accounts receivable	620	540
Inventories	10,310	9,450
Prepaid expenses	460	325
PP&E, net	14,000	13,200
Intangible assets, net	4,700	4,900
TOTAL ASSETS:	35,037	30,905
Liabilities:
Accounts payable	460	640
Accrued liabilities	1,100	780
Unearned revenue	130	250
Long-term debt	7,300	8,100
TOTAL LIABILITIES:	8,990	9,770
Shareholders’ Equity:
Common stock	7	5
Additional paid-in capital	6,400	4,350
Retained earnings	19,640	16,780
TOTAL SHAREHOLDERS’ EQUITY	26,047	21,135
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY:	35,037	30,905

                                    

During the fiscal year 2017, the following events occurred:

1. The company issued long-term debt in the amount of$1,200. Some of the debt at the beginning of the year was paidin 2017.
2. Depreciation expense was $2,000.
3. The company purchased new PP&E, in cash. The company did not sell any of its PP&E in 2017. There was no impairment of PP&E in 2017.
4. The company issued 20 shares with a par value of $0.1 per share. In return, the company received a total of $2,052 in cash.
5. The company declared and paid a $560 dividend during 2017.
6. Net income in 2017 was $________ (use the information provided to find out).

Required:

Prepare the statement of cash flows for the year ended December 31, 2017,using the indirect method. Specifically:

1. Fill out the worksheet below.
2. Compose a properlyformatted cash flow statement.

Answer 1

F U Corporation
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flow from Operating activities:
Net income (19640+560-16780)	3420
Add: Depreciation	2000
Add: Amortization of intangible assets (4900-4700)	200
Change in current current assets and current liabilities:
Increase in account receivable (540-620)	-80
Increase in inventory (9450-10310)	-860
Increase in prepaid expenses (325-460)	-135
Decrease in accounts payable (460-640)	-180
Increase in accrued liabilities (1100-780)	320
Decrease in unearned revenue (130-250)	-120
Change in cash due to operations (A)		4565
Cash flow from Investing activities:
Purchase of PP&E (14,000-(13,200-5000))	-2800
Change in cash due to investing (B)		-2800
Cash flow from Financing activities:
Sale of common stock	2052
Repayment of long term debt ((8100+1200-7300)	-2000
Issue of long-term debt	1200
Payment of cash dividend	-560	692
Change in cash due to Financing ( C)
Net cash flow (A+B+C)		2457
Add: Cash at the beginning of the year		2490
Cash at the end of the year		4947