Question

The comparative statements of financial position of Mikos Inc. as at December 31, 2017 and 2018, and its statement of earnings for the year ended December 31, 2018, are presented below:

MIKOS INC.
Comparative Statements of Financial Position
December 31
	2018			2017
Assets
Cash	$	10,700		$	18,700
Short-term investments		73,900			42,100
Accounts receivable		76,500			32,800
Inventories, at cost		57,400			41,700
Prepaid expenses		5,700			9,400
Land		51,800			78,500
Property, plant, and equipment, net		286,800			187,500
Intangible assets		25,700			31,400
	$	588,500		$	442,100
Liabilities and Shareholders’ Equity
Accounts payable	$	18,700		$	43,400
Income tax payable		9,400			2,700
Accrued liabilities		11,700			-0-
Long-term notes payable		127,000			184,000
Contributed capital		234,000			68,500
Retained earnings		187,700			143,500
	$	588,500		$	442,100

MIKOS INC.
Statement of Earnings
For the Year Ended December 31, 2018
Sales				$	901,000
Cost of sales	$	447,000
Amortization expense—intangible assets		5,700
Depreciation expense—property, plant, and equipment		34,700
Operating expenses		238,000
Interest expense		13,700			739,100
Earnings before income taxes					161,900
Income tax expense					48,570
Net earnings				$	113,330

Additional information is as follows:
a.	Land was sold for cash at its carrying amount.
b.	The short-term investments will mature in February 2019 (i.e. these are cash equivalents).
c.	Cash dividends were declared and paid in 2018.
d.	New equipment with a cost of $167,700 was purchased for cash, and old equipment was sold at its carrying amount.
e.	Long-term notes of $18,500 were paid in cash, and notes of $38,500 were converted to shares.

Required:
1.	Prepare a statement of cash flows for Mikos Inc. for the year ended December 31, 2018 by using the indirect method. When dealing with depreciation and amortization expenses (in the operating section), place them together as a single line item. (Negative answers should be indicated by a minus sign.)

     

2.	Not available in Connect.

3.

Answer 1

MIKOS INC.
Statement of Cash Flows
For the Year Ended December 31, 2018
Cash flow from operating activities
Net Income		$113,330
Adjustment for:
Add: Depreciation	$34,700
Add: Amortization	$5,700
Less: Increase in accounts receivables ($32,800 - $76,500)	-$43,700
Less: Increase in inventory ($41,700 - $57,400)	-$15,700
Add: Decrease in prepaid expenses ($9,400 - $5,700)	$3,700
Less: Decrease in accounts payable ($18,700 - $43,400)	-$24,700
Add: Increase in income tax payable ($9,400 - $2,700)	$6,700
Add: Increase in accrued liabilities	$11,700	-$21,600
Cash generated from operations		$91,730
Cash flow from investing activities:
Sale of land ($78,500 - $51,800)	$26,700
Purchase of equipment	-$167,700
Sale of equipment ($187,500 + $167,700 - $286,800 - $34,700)	$33,700
Net cash used in investing activities		-$107,300
Cash flow from Financing activities:
Payment of note	-$18,500
Common stock issued ($234,000 - $68,500 - $38,500)	$127,000
Dividend paid ($143,500 + $113,330 - $187,700)	-$69,130
Net cash used in financing activities		$39,370
Net Increase (decrease in cash)		$23,800
Cash and short term investments beginning of the year		$60,800
Cash and short term investments end of year		$84,600