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1) The comparative balance sheets for Sunland Company as of December 31 are presented below. Sunland...

1) The comparative balance sheets for Sunland Company as of December 31 are presented below.

Sunland Company
Comparative Balance Sheets
December 31

Assets

2017

2016
Cash

$ 80,104

$ 53,010
Accounts receivable

58,900

68,324
Inventory

178,408

167,276
Prepaid expenses

18,000

24,738
Land

170,810

153,140
Buildings

235,600

235,600
Accumulated depreciation—buildings

(70,680

)

(47,120

)
Equipment

265,050

182,590
Accumulated depreciation—equipment

(53,010

)

(41,230

)
Total

$883,182

$796,328

Liabilities and Stockholders’ Equity
Accounts payable

$ 52,692

$ 42,408
Bonds payable

353,400

353,400
Common stock, $1 par

235,600

188,480
Retained earnings

241,490

212,040
Total

$883,182

$796,328


Additional information:

1. Operating expenses include depreciation expense of $49,476.
2. Land was sold for cash at book value.
3. Cash dividends of $14,136 were paid.
4. Net income for 2017 was $43,586.
5. Equipment was purchased for $108,376 cash. In addition, equipment costing $25,916 with a book value of $11,780 was sold for $9,424 cash.
6. 47,120 shares of $1 par value common stock were issued in exchange for land with a fair value of $47,120.


Prepare a statement of cash flows for the year ended December 31, 2017, using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

2) Condensed financial data of Ivanhoe Company follow.

Ivanhoe Company
Comparative Balance Sheets
December 31

Assets

2017

2016
Cash

$ 92,920

$ 55,660
Accounts receivable

100,970

43,700
Inventory

129,375

118,278
Prepaid expenses

32,660

29,900
Long-term investments

158,700

125,350
Plant assets

327,750

278,875
Accumulated depreciation

(57,500

)

(59,800

)
Total

$784,875

$591,963

Liabilities and Stockholders’ Equity
Accounts payable

$ 117,300

$ 77,395
Accrued expenses payable

18,975

24,150
Bonds payable

126,500

167,900
Common stock

253,000

201,250
Retained earnings

269,100

121,268
Total

$784,875

$591,963

Ivanhoe Company
Income Statement Data
For the Year Ended December 31, 2017
Sales revenue

$446,729
Less:
     Cost of goods sold

$155,779
     Operating expenses, excluding depreciation

14,272
     Depreciation expense

53,475
     Income tax expense

31,372
     Interest expense

5,440
     Loss on disposal of plant assets

8,625

268,963
Net income

$ 177,766


Additional information:

1. New plant assets costing $115,000 were purchased for cash during the year.
2. Old plant assets having an original cost of $66,125 and accumulated depreciation of $55,775 were sold for $1,725 cash.
3. Bonds payable matured and were paid off at face value for cash.
4. A cash dividend of $29,934 was declared and paid during the year.


Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Solutions

Expert Solution

Answer to Question 1:

Purchase of Land = $47,120

Land, Dec. 31, 2017 = Land, Dec. 31, 2016 + Land purchased - Land Sold
$170,810 = $153,140 + $47,120 - Land Sold
Land Sold = $29,450

Loss on Sale of Equipment = Book Value - Proceed from Sale
Loss on Sale of Equipment = $11,780 - $9,424
Loss on Sale of Equipment = $2,356

ekkarill92 answered 2 years ago
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