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In: Accounting

Problem 23-01 The following are Flounder Corp.’s comparative balance sheet accounts at December 31, 2020 and...

Problem 23-01

The following are Flounder 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

$812,400

$700,100

$112,300

Accounts receivable

1,135,500

1,158,500

(23,000

)

Inventory

1,844,800

1,713,900

130,900

Property, plant, and equipment

3,316,600

2,964,200

352,400

Accumulated depreciation

(1,160,900

)

(1,040,300

)

(120,600

)

Investment in Myers Co.

309,500

274,000

35,500

Loan receivable

250,500

250,500

   Total assets

$6,508,400

$5,770,400

$738,000

Accounts payable

$1,015,400

$955,000

$60,400

Income taxes payable

29,900

50,300

(20,400

)

Dividends payable

79,600

100,500

(20,900

)

Lease liabililty

412,000

412,000

Common stock, $1 par

500,000

500,000

Paid-in capital in excess of par—common stock

1,511,500

1,511,500

Retained earnings

2,960,000

2,653,100

306,900

   Total liabilities and stockholders’ equity

$6,508,400

$5,770,400

$738,000


Additional information:

1. On December 31, 2019, Flounder acquired 25% of Myers Co.’s common stock for $274,000. On that date, the carrying value of Myers’s assets and liabilities, which approximated their fair values, was $1,096,000. Myers reported income of $142,000 for the year ended December 31, 2020. No dividend was paid on Myers’s common stock during the year.
2. During 2020, Flounder loaned $312,200 to TLC Co., an unrelated company. TLC made the first semiannual principal repayment of $61,700, plus interest at 10%, on December 31, 2020.
3. On January 2, 2020, Flounder sold equipment costing $59,600, with a carrying amount of $37,700, for $40,200 cash.
4. On December 31, 2020, Flounder entered into a capital lease for an office building. The present value of the annual rental payments is $412,000, which equals the fair value of the building. Flounder made the first rental payment of $59,700 when due on January 2, 2021.
5. Net income for 2020 was $386,500.
6. Flounder 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

$79,600 $100,500


Prepare a statement of cash flows for Flounder 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).)

Solutions

Expert Solution

Cash flow statement for the year ended December 31,2020

Cash flow from Operating activities
Net income $ 386,500
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation [120,600 + (59,600 - 37,700)] 142,500
Equity in earnings of Myers Co.(142,000 * 25%) (35,500)
Gain on sale of equipment (40,200 - 37,700) (2,500)
Decrease in accounts receivable 23,000
Increase in inventory (130,900)
Increase in accounts payable 60,400
Decrease in income tax payable (20,400) 36,600
Net cash from Operating activities 423,100
Cash flow from Investing activities
Proceeds from sale of equipment 40,200
Loan to TLC Co. (312,200)
Principal payment of loan receivable 61,700 (210,300)
Cash flow from financing activities
Dividend paid (100,500) (100,500)
Opening cash balance 700,100
Add: Net increase in cash balance 112,300
Closing cash balance 812,400

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