Question

Exercise 23-10 Following are selected balance sheet accounts of Whispering Bros. Corp. at December 31, 2017 and 2016, and the increases or decreases in each account from 2016 to 2017. Also presented is selected income statement information for the year ended December 31, 2017, and additional information. Selected balance sheet accounts Assets 2017 2016 Increase (Decrease) Accounts receivable $34,300 $23,800 $10,500 Property, plant, and equipment 275,600 245,400 30,200 Accumulated depreciation—plant assets (177,300 ) (166,200 ) (11,100 ) Liabilities and stockholders’ equity 2017 2016 Increase Bonds payable $ 48,500 $46,400 $2,100 Dividends payable 8,100 4,900 3,200 Common stock, $1 par 21,900 18,800 3,100 Additional paid-in capital 9,000 3,000 6,000 Retained earnings 103,900 91,900 12,000 Selected income statement information for the year ended December 31, 2017: Sales revenue $156,300 Depreciation 38,000 Gain on sale of equipment 14,500 Net income 31,300 Additional information: 1. During 2017, equipment costing $45,000 was sold for cash. 2. Accounts receivable relate to sales of merchandise. 3. During 2017, $20,200 of bonds payable were issued in exchange for property, plant, and equipment. There was no amortization of bond discount or premium. Determine the category (operating, investing, or financing) and the amount that should be reported in the statement of cash flows for the following items. Activity (a) Payments for purchase of property, plant, and equipment. $ (b) Proceeds from the sale of equipment. $ (c) Cash dividends paid. $ (d) Redemption of bonds payable.

Answer 1

Answer a.

Purchase of property, plant and equipment = Increase in property, plant and equipment + Cost of equipment sold
Purchase of property, plant and equipment = $30,200 + $45,000
Purchase of property, plant and equipment = $75,200

Payment for purchase of property, plant and equipment = Purchase of property, plant and equipment - Bonds issued in exchange for property, plant and equipment
Payment for purchase of property, plant and equipment = $75,200 - $20,200
Payment for purchase of property, plant and equipment = $55,000

Answer b.

Accumulated depreciation of equipment sold = Depreciation expense - Increase in accumulated depreciation
Accumulated depreciation of equipment sold = $38,000 - $11,100
Accumulated depreciation of equipment sold = $26,900

Proceeds from sale of equipment = Cost of equipment sold - Accumulated depreciation of equipment sold + Gain on sale of equipment
Proceeds from sale of equipment = $45,000 - $26,900 + $14,500
Proceeds from sale of equipment = $32,600

Answer c.

Dividend declared = Net income - Increase in retained earnings
Dividend declared = $31,300 - $12,000
Dividend declared = $19,300

Cash dividends paid = Dividend declared - Increase in dividends payable
Cash dividends paid = $19,300 - $3,200
Cash dividends paid = $16,100

Answer d.

Redemption of bonds payables = Bonds payable issued - Increase in bonds payable
Redemption of bonds payables = $20,200 - $2,100
Redemption of bonds payables = $18,100