Question

2. SportsNet Corporation’s recent comparative balance sheet and income statement follow:

Balance Sheets, December 31	2019	2020
Assets
Cash	$ 51,200	$102,400
Accounts receivable	179,200	166,400
Allowance for doubtful accounts	(19,200)	(16,000)
Other receivables (nontrade)	9,600	6,400
Inventory	96,000	102,400
Equipment	256,000	246,400
Accumulated depreciation	(19,200)	(16,000)
Intangibles, net	176,000	169,600
Total assets	$729,600	$761,600
Liabilities and Stockholders' Equity
Accounts payable	$160,000	$192,000
Income taxes payable	224,000	160,000
Interest payable	6,400	3,200
Bonds payable	102,400	—
Discount on bonds payable	(6,400)	—
Common stock, no-par	224,000	256,000
Retained earnings	19,200	150,400
Total liabilities and stockholders' equity	$729,600	$761,600

Income Statement For Year Ended December 31	2020
Sales revenue	$960,000
Cost of goods sold	(256,000)
Depreciation expense	(144,000)
Patent amortization	(6,400)
Other expenses	(140,800)
Interest expense	(9,600)
Income tax expense	(208,000)
Net income	$195,200

Additional information

1. $64,000 of dividends was declared and paid in 2020.

2. Equipment costing $211,200, with a book value of $64,000, was sold at book value. New equipment also was purchased; common stock was issued in partial payment, $32,000.

3. Bonds were retired at book value; $ 1,600 of bond discount was amortized in 2020.

Please prepare the cash flow statement in proper form using the indirect method

Answer 1

Answer:

Cash Flow statement
Cash Flow from Operating Activities
Profit before tax	$ 403,200
Adjustments to be made:
Depreciation	$ 144,000
Amortization	$      6,400
Interest expense	$      9,600
Decrease in Accounts receivable	$      9,600
Decrease in Other receivables	$      3,200
Increase in Inventory	$     (6,400)
Decrease in Accounts payable	$    32,000
Income Tax Paid	$(272,000)
		$ 329,600
Cash Flow from Investing Activities
Equipment purchased	$(169,600)
Equipment sold	$    64,000
		$(105,600)
Cash Flow from Financing Activities
Dividend paid	$ (64,000)
Bonds repaid	$ (96,000)
Interest paid	$ (12,800)
		$(172,800)
Total cash Flows		$    51,200
Add: Opening Cash		$    51,200
Closing Cash		$ 102,400

Working Notes:

Equipment a/c
Particulars	Amount	Particulars	Amount
Balance b/d	$ 256,000	Bank	$   64,000
Common stock	$   32,000	Acc depreciation	$ 147,200
Bank	$ 169,600
		Balance c/d	$ 246,400
	$ 457,600		$ 457,600

and,

Accumulated depreciation a/c
Particulars	Amount	Particulars	Amount
Equipment	$ 147,200	Balance b/d	$   19,200
		Depreciation	$ 144,000
Balance c/d	$   16,000
	$ 163,200		$ 163,200

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