Question

Problem 23-01

The following are Kingbird Corp.’s comparative balance sheet accounts at December 31, 2020 and 2019, with a column showing the increase (decrease) from 2019 to 2020.

COMPARATIVE BALANCE SHEETS
		2020			2019			Increase (Decrease)
Cash		$821,300			$694,000			$127,300
Accounts receivable		1,124,400			1,158,200			(33,800	)
Inventory		1,852,600			1,702,600			150,000
Property, plant, and equipment		3,300,400			2,951,400			349,000
Accumulated depreciation		(1,174,500	)		(1,048,100	)		(126,400	)
Investment in Myers Co.		312,300			273,800			38,500
Loan receivable		250,100			—			250,100
Total assets		$6,486,600			$5,731,900			$754,700
Accounts payable		$1,019,600			$959,800			$59,800
Income taxes payable		29,800			50,100			(20,300	)
Dividends payable		79,400			99,100			(19,700	)
Lease liabililty		408,500			—			408,500
Common stock, $1 par		500,000			500,000			—
Paid-in capital in excess of par—common stock		1,504,000			1,504,000			—
Retained earnings		2,945,300			2,618,900			326,400
Total liabilities and stockholders’ equity		$6,486,600			$5,731,900			$754,700

Additional information:

1.		On December 31, 2019, Kingbird acquired 25% of Myers Co.’s common stock for $273,800. On that date, the carrying value of Myers’s assets and liabilities, which approximated their fair values, was $1,095,200. Myers reported income of $154,000 for the year ended December 31, 2020. No dividend was paid on Myers’s common stock during the year.
2.		During 2020, Kingbird loaned $309,100 to TLC Co., an unrelated company. TLC made the first semiannual principal repayment of $59,000, plus interest at 10%, on December 31, 2020.
3.		On January 2, 2020, Kingbird sold equipment costing $59,500, with a carrying amount of $38,400, for $39,900 cash.
4.		On December 31, 2020, Kingbird entered into a capital lease for an office building. The present value of the annual rental payments is $408,500, which equals the fair value of the building. Kingbird made the first rental payment of $59,800 when due on January 2, 2021.
5.		Net income for 2020 was $405,800.
6.		Kingbird declared and paid the following cash dividends for 2020 and 2019.

		2020		2019
Declared		December 15, 2020		December 15, 2019
Paid		February 28, 2021		February 28, 2020
Amount		$79,400		$99,100

Prepare a statement of cash flows for Kingbird Corp. for the year ended December 31, 2020, 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).)

Answer 1

Answer:

Statement of Cash Flows
Particulars	Amount ($)	Amount ($)
Net Income		405800
Adjustment to reconcile net income to ner cash provided by operating actvities:
Depreciation (a)	147500
Gain on sale of equipment (b)	(1500)
Equity in earnings of Myrs co (c)	(38500)
Decrease in accounts receivable	33800
Increase in Inventory	(150000)
Increase in Accounts payable	59800
Decreas in Income taxes payable	(20300)	30800
Net Cash provided by operating activities		436600
Cash flow from Investing activities:
Proceeds from sale of equipment	39900
Loan to TLC co	(309100)
Principal payment of loan receivable	59000
Net cash used by financing activities:		(210200)
Cash flow from financing activities:
Dividend paid	(99100)
Net Cash used by finanacing activities		(99100)
Net Increase in cash		127300
Cash Jan 1, 2020		694000
Cash Dec 31, 2020		821300
Schedule at bottom and financing of Cash flows:
Non cash investing and financing activities:
Issuance of capital lease liability for office building		408500

Working Notes:

(a) Depreciation:-
Net Increase in accumulateed depreciation for the year ended Dec 31, 2020		126400
Accumulated depreciation of equipment sold:
Cost	59800
Carrying value	(38400)	21100
Depreciation for 2020		147500
(b) Gain on sale of equipment
Proceeds		39900
Carrying value		38400
Gain		1500
(c) Equity in earnings of Myers Co:
Myers Net Income for 2020		154000
Sunlands ownership		25%
Undistributed earnings of Myers Co		38500