Question

Condensed financial data of Tebow Company appear below:
TEBOW COMPANY
Comparative Balance Sheet
December 31

2017 2016

Assets

Cash $ 70,000 $ 35,000
Accounts receivable 82,000 53,000
Inventories 120,000 132,000
Prepaid expenses 19,000 25,000
Investments 80,000 65,000
Plant assets 310,000 250,000
Accumulated depreciation (65,000) (60,000)
Total $616,000 $500,000

Liabilities and Stockholders' Equity

Accounts payable $ 95,000 $ 75,000
Accrued expenses payable 22,000 24,000
Bonds payable 120,000 150,000
Common stock 245,000 170,000
Retained earnings 134,000 81,000
Total $616,000 $500,000

TEBOW COMPANY
Income Statement

For the Year Ended December 31, 2017

Sales $480,000
Less:
Cost of goods sold $290,000
Operating expenses (includes depreciation expense) 77,000
Income taxes 15,000
Interest expense 13,000
Loss on sale of plant assets 3,000 398,000
Net income $ 82,000
Additional information:
1. Old plant assets costing $25,000 were sold when book value was $13,000.
2. Bonds with a face value of $30,000 were converted into $30,000 of common stock.

Prepare a statement of cash flows for the year using the indirect method

(Please show the calculations)

Answer 1

Depreciation on plant assets sold = Cost of plant assets - Book value of plant assets
Depreciation on plant assets sold = $25,000 - $13,000
Depreciation on plant assets sold = $12,000

Depreciation expense during the year = Ending accumulated depreciation + Depreciation on plant assets sold - Beginning accumulated depreciation
Depreciation expense during the year = $65,000 + $12,000 - $60,000
Depreciation expense during the year = $17,000

Proceed from sale of plant assets = Book value of plant assets - Loss on sale of plant assets
Proceed from sale of plant assets = $13,000 - $3,000
Proceed from sale of plant assets = $10,000

Purchase of plant assets = Ending plant assets + Cost of plant assets sold - Beginning plant assets
Purchase of plant assets = $310,000 + $25,000 - $250,000
Purchase of plant assets = $85,000

Dividend paid = Beginning retained earnings + Net income - Ending retained earnings
Dividend paid = $81,000 + $82,000 - $134,000
Dividend paid = $29,000