Question

The following financial statements and information are available for Blythe Industries Inc.

Balance Sheets
As of December 31
	Year 3				Year 2
Assets
Cash	$	160,200			$	120,600
Accounts receivable		103,200				85,000
Inventory		186,400				171,800
Marketable securities (available for sale)		284,000				220,000
Equipment		650,000				490,000
Accumulated depreciation		(310,000)				(240,000)
Land		80,000				120,000
Total assets		1,153,800				967,400
Liabilities and equity
Liabilities
Accounts payable (inventory)	$	36,400			$	66,200
Notes payable—Long-term		230,000				250,000
Bonds payable		200,000				100,000
Total liabilities		466,400				416,200
Stockholders’ equity
Common stock, no par		240,000				200,000
Preferred stock, $50 par		110,000				100,000
Paid-in capital in excess of par—Preferred stock		34,400				26,800
Total paid-In capital		384,400				326,800
Retained earnings		333,000				264,400
Less: Treasury stock		(30,000)				(40,000)
Total stockholders’ equity		687,400				551,200
Total liabilities and stockholders’ equity	$	1,153,800			$	967,400

Income Statement
For the Year Ended December 31, Year 3
Sales revenue					$	1,050,000
Cost of goods sold						(766,500)
Gross profit						283,500
Operating expenses
Supplies expense	$	20,400
Salaries expense		92,000
Depreciation expense		90,000
Total operating expenses						(202,400)
Operating income						81,100
Nonoperating items
Interest expense						(16,000)
Gain from the sale of marketable securities						30,000
Gain from the sale of land and equipment						12,000
Net income					$	107,100

Additional Information

1. Sold land that cost $40,000 for $44,000.

2. Sold equipment that cost $30,000 and had accumulated depreciation of $20,000 for $18,000.

3. Purchased new equipment for $190,000.

4. Sold marketable securities that were classified as available-for-sale and that cost $40,000 for $70,000.

5. Purchased new marketable securities, classified as available-for-sale, for $104,000.

6. Paid $20,000 on the principal of the long-term note.

7. Paid off a $100,000 bond issue and issued new bonds for $200,000.

8. Sold 100 shares of treasury stock at its cost.

9. Issued some new common stock.

10. Issued some new $50 par preferred stock.

11. Paid dividends. (Note: The only transactions to affect retained earnings were net income and dividends.)

1. Prepare the statement of cash flows for Blythe Industries using direct method. (Amounts to be deducted and cash outflows should be indicated by a minus sign.) Please show your work line by line so I can follow along. Also, you can only use the options from the drop down menu. They are as follows:

   1. Interest, inventory purchased, Operating expenses, Paid to purchase equipment, Paid to purchase marketable securities, Payment of dividends, Proceeds from bond issue, Proceeds from preferred stock issue, Proceeds from sale of equipment, Proceeds from sale of land, Proceeds from sale of marketable securities, Proceeds from sale of treasury stock, Repayment of bonds, Repayment of loan,  Sales
      Blythe Industries, INC.
      Statement of Cash Flows
      For the Year Ended December 31, Year 3
      Cash flows from operating activities:
      Cash Receipts from:
      Sales
      Total cash inflows		$1,032,700
      Cash payments for:
      Inventory purchased
      Drop down menu option only
      Operating expenses
      Interest
      Total cash outflows		(941,700)
      not attempted		91,000
      Cash flows from investing activities:
      Proceeds from sale of land
      Proceeds from sale of equipment
      Paid to purchase equipment
      Proceeds from sale of marketable securities
      not attempted
      not attempted
      not attempted		(180,100)
      Cash flows from financing activities:
      Repayment of loans
      Repayment of bonds
      Proceeds from sale of treasury stocks
      Proceeds from common stock issues
      Payment of dividends
      Proceeds from preferred stock issues
      not attempted
      not attempted
      Net cash inflow from financing activities		129,000
      Net increase in cash		39,900
      Plus: Beginning cash balance
      Ending cash balance		$161,500

   2. b-1. What is the cost per share of the treasury stock?

   3. b-2. What was the issue price per share of the preferred stock?

   4. b-3. What was the book value of the equipment sold?

      .
      b-1.	Cost per share of the treasury stock.
      b-2.	Issue price of the preferred stock.		per share
      b-3.	Book value of equipment

Answer 1

Under the direct method, before calculating net cash flows from operating activities, we will first calculate the components of operating activities section. We will analyse the previous year and current year figures to find out the increase or decrease in activity / transaction as per below:

1. Cash received from customers:

Sales $1050000

Less: Increase in accounts receivables - $18200

Cash received from customers $1031800

2. Cash paid to suppliers:

Cost of the goods sold $766500

Add: Increase in inventory    $14600

Add: Decrease in accounts payable $29800

Cash paid to suppliers    $810900

3. Dividends paid:

Beginning retained earnings $264400

Add: Net income $107100

Less: Ending retained earnings - $333000

Dividends paid $38500

Now, we will prepare the statement of cash flows as per below (here also, we will analyse the increase or decrease in investing and financing activity / transactions for current year in relation to previous year):

Statement of cash flows for 2016:

Cash flows from operating activities:

Cash received from customers $1031800

Cash paid to suppliers - $810900

Supplies expenses paid - $20400

Salaries expenses paid - $92000

Interest expense - $16000

Net cash flows from operating activities $92500

Purchase of equipment ($190000)

Sale of land    $44000

Sale of equipment $18000

Sale of marketable securities $70000

Purchase of new marketable securities ($104000)

Cash from investing activities ($162000)

Dividends paid ($38500)

Bonds payable issued $200000

Bonds payable paid ($100000)

Long term note paid ($20000)

Common stock issued $40000

Preferred stock issued $10000

Treasury stock sold $10000

Additional paid in capital $7600

Cash from financing activities $109100

Net cash provided by operating

investing and financing activities $39600

Beginning cash balance $120600

Ending cash balance $160200