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In: Accounting

The comparative balance sheets for 2018 and 2017 and the statement of income for 2018 are...

The comparative balance sheets for 2018 and 2017 and the statement of income for 2018 are given below for Dux Company. Additional information from Dux's accounting records is provided also.

DUX COMPANY
Comparative Balance Sheets
December 31, 2018 and 2017
($ in 000s)

2018

2017

Assets

Cash

$

33

$

20

Accounts receivable

48

50

Less: Allowance for uncollectible accounts

(4

)

(3

)

Dividends receivable

3

2

Inventory

55

50

Long-term investment

15

10

Land

70

40

Buildings and equipment

225

250

Less: Accumulated depreciation

(25

)

(50

)

$

420

$

369

Liabilities

Accounts payable

$

13

$

20

Salaries payable

2

5

Interest payable

4

2

Income tax payable

7

8

Notes payable

30

0

Bonds payable

93

67

Shareholders' Equity

Common stock

210

200

Paid-in capital—excess of par

24

20

Retained earnings

45

47

Less: Treasury stock

(8

)

0

$

420

$

369

DUX COMPANY
Income Statement
For the Year Ended December 31, 2018
($ in 000s)

Revenues

Sales revenue

$

200

Dividend revenue

3

$

203

Expenses

Cost of goods sold

120

Salaries expense

25

Depreciation expense

5

Bad debt expense

1

Interest expense

8

Loss on sale of building

3

Income tax expense

16

178

Net income

$

25

Additional information from the accounting records:

a. A building that originally cost $40,000, and which was three-fourths depreciated, was sold for $7,000.

b. Land was acquired by issuing a 13%, seven-year, $30,000 note payable to the seller.

c. Cash dividends of $13,000 were paid to shareholders.


Required:
Prepare the statement of cash flows for Dux Company using the indirect method. (Do not round intermediate calculations. Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands. (i.e., 10,000 should be entered as 10).)

Solutions

Expert Solution

Dux Company
Cash flow statement for the year ended 31st December 2018
$ in 000s
Period Ending: Dec-18
Cash flows from operating activities:
Net income (loss) 25
Adjustments to reconcile net income (loss) to
net cash from operating activities:
Depreciation and amortization 5
Loss on Sale of building 3
(Increase) decrease in inventories (5)
(Increase) decrease in accounts receivable 2
(Increase) decrease in Dividends receivable (1)
Increase (decrease) in accounts payable (7)
Increase (decrease) in salaries payable (3)
Increase (decrease) in interest payable 2
Increase (decrease) in income tax payable (1)
Increase (decrease) in allowance for uncollectible accounts 1
Net cash from operating activities 21
Cash flows from investing activities:
Purchases of investments (5)
Proceeds from sales of Building 7
Purchases of Building -15
Net cash from investing activities (13)
Cash flows from financing activities:
Repurchases of common stock (8)
Proceeds from bonds issued 26
Dividends paid (13)
Net cash used in financing activities 5
Net increase (decrease) in cash & cash equivalents 13
Cash & cash equivalents, start of period 20
Cash & cash equivalents, end of period 33
The increase in common stock is mainly due to issue of stock dividend
Which is reflected in retained earnings as retained earnings for current year are 45 which ideally should be 59, the difference is issue of shares using retained earnings

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