Question

In: Accounting

A comparative balance sheet for Party Corporation is presented below. Party Corporation Comparative Balance Sheets 31-Dec...

A comparative balance sheet for Party Corporation is presented below.

Party Corporation

Comparative Balance Sheets

31-Dec

2019

2018

Cash

$18,700

$22,700

Accounts receivable

$24,700

$22,300

Investments

$25,000

$16,000

Equipment

$59,000

$70,000

Accumulated depreciation

($14,500)

($10,000)

     Total

$112,900

$121,000

Accounts payable

$13,600

$11,100

Bonds payable

$6,000

$30,000

Common stock

$50,000

$45,000

Retained earnings

$43,300

$34,900

    Total

$112,900

$121,000

Additional information:

1.        Net income for 2019 was $17,700; Dividends declared and paid were $9,300.

2.        Equipment which cost $11,000 and had accumulated depreciation of $2,000 was sold for $4,000.

Using an excel spreadsheet, prepare a statement of cash flows for 2019 using the indirect method. Show your work.

Solutions

Expert Solution

Answer:

Party Corporation

Statement of Cash Flow for the year ended 2019

Particulars (Amount in $)
Cash flow from Operating Activities:
Net Income during the Year 17700
Adjustments:
Add: Depreciation (14500+2000-10000) 6500
Add: Loss on Sale of Equipment 5000
Operating profit before working capital changes:
Less: Increase in Accounts Receivable (2400)
Add: Increase in Accounts Payable 2500
Less: Decrease in Bonds Payable (24000)
Net Cash from Operating Activities 5300
Cash Flow from Investing Activities:
Purchase of Investment (9000)
Sale of Equipment 4000
Net cash flow from Investing Activities (5000)
Cash flow from Financing Activities:
Dividend Paid (9300)
Issue of Common Stock 5000
Net cash flow from Financing Activities: (4300)
Net Increase/(Decrease) in cash & cash equivalent (4000)
Cash & Cash Equivalent at the beginning of the year 22700
Cash & Cash Equivalent at the Closing of the year 18700

Note: Assuming that Bond Payable is for the short term & hence considered as current liabilities.


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