The Sage Corporation prepared, for 2017 and 2016, the following balance sheet data: December 31 2017...

The Sage Corporation prepared, for 2017 and 2016, the following balance sheet data:

	December 31
	2017	2016
Cash ....................................	$ 87,375	$ 63,750
Available-for-sale securities (not cash equivalents) .........................	17,250	105,000
Accounts receivable .....................	90,000	86,250
Merchandise inventory ...................	187,500	163,500
Prepaid insurance .......................	1,125	1,500
Land, buildings, and equipment .........	1,378,875	1,087,500
Accumulated depreciation ................	(558,750)	(498,750)
Total .................................	$1,203,375	$1,008,750

Accounts payable ........................	$ 153,375	$ 236,250
Salaries payable ........................	18,750	26,250
Notes payable--bank (current) ...........	37,500	150,000
Bonds payable ...........................	375,000	0
Common stock ............................	600,000	600,000
Retained earnings (deficit) .............	18,750	(3,750)
Total .................................	$1,203,375	$1,008,750

Additional information:

(a)	Sold available-for-sale securities (not cash equivalents) costing $87,750 for $90,000.
(b)	Equipment costing $18,750 with a book value of $3,750 was sold for $4,500.
(c)	Issued 8% bonds payable at par, $375,000.
(d)	Purchased new equipment for cash, $310,125.
(e)	Paid cash dividends of $22,500 during the year.
(f)	Net income for 2017 was $45,000.
(g)	Proceeds from the notes payable were used for operating purposes.

Prepare a cash flow statement for Sage Corporation for 2017, using the indirect method.

Expert Solution


Sage Corporation
Statement of cash flows for the year ended 2017

Cash flows from operating activities
Net income		45,000
Adjustments for:
Depreciation	75,000
Less:Profit on sale of Available-for-sale securities	(2,250)
(90000-87750)
Less:Profit on sale of Equipment	(750)
Less:Increase in trade receivable	(3,750)
Less:Increase in inventory	(24,000)
Add: Decrease in Pre Paid Insurance	375
Less: Decrease in Note Payable	(112,500)
Less: Decrease in Salary Payable	(7,500)
Less: Decrease in Accounts Payable	(82,875)
		(158,250)
*Cash generated from operations-----A*		(113,250)

Cash flows from investing activities
Purchase of equipment	(310,125)
Sale of Equipment	4,500
Sale of Available-for-sale securities	90,000
*Net cash used in investing activities----B*		(215,625)

Cash flows from financing activities
Issue of Bonds	375,000
Payment of Dividend	(22,500)

*Net cash used in financing activities-----C*		352,500

Net increase in cash and cash equivalents(A+B+C)		23,625
Cash and cash equivalents at beginning of period		63,750
Cash and cash equivalents at end of period		87,375



Cost of Equipment	18,750
Accumulated Depreciaiton	15,000
Book Value	3,750
Sale	4,500
Profit on sale of machine	750


Accumulated Depreciation -2016	498,750
Less: Accumulated Deprecation for sale of equipment	(15,000)
	483,750
Accumulated Depreciation -2017	558,750
Depreciation for the year 2017	75,000	(558750-483750)

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