Question

23-2. December 31

2017                         2016

33,500                         13,000 Cash

12,250                         10,000 Accounts Receivable

12,000                         9,000 Inventory

0                                  3,000 Long-Investments

0                                  29,750 Building

0                                  (6,000) Accumalted depreciation on building

45,000                         20,000 Equipment

(2,000)                        (4,500) Accumlated depreciation on equipment

5,000                           9,250 Patents

105,750                       83,500 Total Assets

5,000                           3,000 Accounts Payable

1,000                           5,000 Dividends Payable

4,000                           8,500 Short-term Notes Payables

32,000                         25,000 Long term notes payable

39,000                         30,000 Common stock

6,000                            3,000 Pain-in capital excess of par

18,750                         9,000 Retained Earnings

105,750                       83,500 Total

Additional data related to 2017 are as follows:

1. A long term note for $16,000 was issued for the acquisition of equipment.

2. On January 1, 2017 the building was completely destroyed by a flood. Insurance proceeds on the building were $30,000.

3. Equipment that had cost 11,000 and was 40% depreciated was sold for 2,500.

4. Common stock with a par value of 5,000 and a market value of 6,000 was issued to pay off part of the long-term note.

5. A new long-term note was issued for the acquisition of equipment.

6. Equipment was purchased for cash.

7. Dividends were of 7,000 were declared during 2017.

Prepare the statement of cash flows, including any significant non-cash transactions after the reconciliation. (SHOW ALL OF YOUR WORK PLEASE)

Answer 1

	Net Profit [18750-9000]	9750
	Add:Dividend Declared	7000
	Cash Flow from Operating Activities
	Less: Profit on Building [30000+6000-29750]	-6250
	Add: Patent written off [9250-5000]	4250
	Add: Depreciation	1900
	Add: Loss on sale of equipment	4100
	Changes in Working Capital
	Less: Increase in Accounts Receivable [12250-10000]	-2250
	Less: Increase in Inventory [12000-9000]	-3000
	Add: Increase in Accounts Payable [5000-3000]	2000
	Less: Decrease in Short term note payable [8500-4000]	-4500
	Cash Flow from Operating Activities(A)	13000
	Cash Flow from Investing Activities
	Add: Sale of Long Investments	3000
	Add: Insurance of Building	30000
	Add: Sale of Equipment	2500
	Less:Purchase of equipment	-20000
	Cash Flow from Investing Activities (B)	15500
	Cash Flow from Financing Activities
	Add: Increase in common stock	4000
	Add: Increase in Paid in capital excess of par	2000
	Less: Dividend Paid	-11000
	Less: Long term note paid	-3000
	Cash Flow Provided by Financing Activities ( C)	-8000
	Cash Reconciliation
	A + B +C	20500
	Add: Opening Cash Balance	13000
	Closing Cash Balance	33500
Building Account
Opening Balance	29750	Accumulated Deprecation	6000
Profit on building	6250	Cash [Insurance]	30000
	36000		36000
Accumulated Depreciation on Building
Building a/c	6000	Opening Balance	6000
[Transferred due to loss by flood]
	6000		6000
Equipment
Opening Balance	20000	Cash	2500
Purchase through long term note	16000	Accumulated Depreciation	4400
Purchase through cash	20000	Loss on Sale [11000-4400-2500]	4100
		Closing Balance	45000
	56000		56000
Accumulated Depreciation on Equipment
Equipment a/c [11000*40%]	4400	Opening Balance	4500
Closing Balance	2000	Depreciation	1900
	6400		6400
Dividends Payable
Dividend Paid	11000	Opening Balance	5000
Closing Balance	1000	Dividend Declared	7000
	12000		12000
Long Term Note Payable
Cash Paid	3000	Opening Balance	25000
Common Stock	6000	Equipment	16000
Closing Balance	32000
	41000		41000
Common Stock
		Opening Balance	30000
		Long Term Note Payable	5000
Closing Balance	39000	Cash from issue of stock	4000
	39000		39000
Paid in Capital Excess of Par
		Opening Balance	3000
		Long Term Note Payable	1000
Closing Balance	6000	Cash from issue of stock	2000
	6000		6000