In: Accounting
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 |
|||||||
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).)
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 |