Question

The comparative balance sheet of Canace Products Inc. for December 31, 20Y6 and 20Y5, is shown as follows:

1		Dec. 31, 20Y6	Dec. 31, 20Y5
2	Assets
3	Cash	$643,400.00	$679,400.00
4	Accounts receivable (net)	566,800.00	547,400.00
5	Inventories	1,011,000.00	982,800.00
6	Investments	0.00	240,000.00
7	Land	520,000.00	0.00
8	Equipment	880,000.00	680,000.00
9	Accumulated depreciation-equipment	(244,400.00)	(200,400.00)
10	Total assets	$3,376,800.00	$2,929,200.00
11	Liabilities and Stockholders’ Equity
12	Accounts payable	$771,800.00	$748,400.00
13	Accrued expenses payable	63,400.00	70,800.00
14	Dividends payable	8,800.00	6,400.00
15	Common stock, $2 par	56,000.00	32,000.00
16	Paid-in capital: Excess of issue price over par—common stock	408,000.00	192,000.00
17	Retained earnings	2,068,800.00	1,879,600.00
18	Total liabilities and stockholders’ equity	$3,376,800.00	$2,929,200.00

The income statement for the year ended December 31, 20Y6, is as follows:

1	Sales		$5,980,000.00
2	Cost of merchandise sold		2,452,000.00
3	Gross profit		$3,528,000.00
4	Operating expenses:
5	Depreciation expense	$44,000.00
6	Other operating expenses	3,100,000.00
7	Total operating expenses		3,144,000.00
8	Operating income		$384,000.00
9	Other expense:
10	Loss on sale of investments		(64,000.00)
11	Income before income tax		$320,000.00
12	Income tax expense		102,800.00
13	Net income		$217,200.00

Additional data obtained from an examination of the accounts in the ledger for 20Y6 are as follows:

A.	Equipment and land were acquired for cash.
B.	There were no disposals of equipment during the year.
C.	The investments were sold for $176,000 cash
D.	The common stock was issued for cash.
E.	There was a $28,000 debit to Retained Earnings for cash dividends declared.

Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities. Be sure to complete the heading of the statement. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Use a minus sign to indicate a decrease in cash.

Answer 1

Canace Products Inc
Statement of Cash flows - Direct method
For the Year Ended December 31, 20Y6
Cash flows from operating activities
Cash received from customers	$   5,960,600		5980000+547400-566800
Cash paid to suppliers	$ (2,456,800)		2452000+748400-771800+1011000-982800
Cash paid for operating expenses	$ (3,107,400)		3100000+70800-63400
Cash paid for income tax expense	$     (102,800)
Net cash provided by operating activities		$   293,600
Cash flows from investing activities
Cash paid for purchase of equipment	$     (200,000)
Cash paid for purchase of land	$     (520,000)
Cash received from sale of investment	$       176,000
Net cash used by investing activities		$ (544,000)
Cash flows from financing activities
Cash paid for dividends	$       (25,600)		28000+6400-8800
Cash received from issuance of common stock	$       240,000		56000-32000+408000-192000
Net cash provided by financing activities		$   214,400
Net Decrease in cash and cash equivalents		$   (36,000)
Cash and cash equivalents at beginning of period		$   679,400
Cash and cash equivalents at end of period		$   643,400

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