Question

The following information is provided for Sunland’s Chocolate Company:

SUNLAND CHOCOLATE COMPANY Balance Sheet May 31
Assets		2021			2020
Cash		$29,425			$46,500
Accounts receivable		88,300			78,500
Inventory		183,000			159,500
Prepaid expenses		5,800			7,300
Land		134,500			79,000
Equipment		318,000			198,000
Accumulated depreciation—equipment		(76,200	)		(39,500	)
Total assets		$682,825			$529,300
Liabilities and Shareholders’ Equity
Accounts payable		$42,700			$39,500
Dividends payable		7,300			5,800
Income taxes payable		3,000			6,800
Mortgage payable		130,000			79,500
Common shares		218,000			165,500
Retained earnings		281,825			232,200
Total liabilities and shareholders’ equity		$682,825			$529,300

Additional Information:
1.		Profit for 2021 was $112,125.
2.		Common shares were issued for $52,500.
3.		Land with a cost of $52,500 was sold at a loss of $19,800.
4.		Purchased land with a cost of $108,000 with a $57,500 down payment and financed the remainder with a mortgage note payable.
5.		No equipment was sold during 2021.
6.		Net sales for the year were $674,600.
7.		Cost of goods sold for the year was $400,800.
8.		Operating costs, including depreciation expense, were $98,700.
9.		Interest expense was $5,800.
10.		Income tax expense was $37,375.
11.		Accounts payable is used for merchandise purchases.

prepare a cash flow statement for the year using the direct method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Note X: Land with a cost of $  was purchased by paying $  cash and issuing a mortgage note payable for $  .

Answer 1

	Cash flows from operating activities:
	Cash Inflows:
	From customers				$      664,800.00
	Cash Outflows:
	To suppliers of goods				$    (421,100.00)
	For Interest				$         (5,800.00)
	For Other Expense				$      (60,500.00)
	For Income Tax				$      (41,175.00)
	Net cash flow from operating activities					$    136,225.00
	Cash flows from investing activities:
	Sale of land				$        32,700.00
	Equipment purchased				$    (120,000.00)
	Land Purchased				$      (57,500.00)
	Net cash flow from investing activities					$ (144,800.00)
	Cash flows from financing activities:
	Common Stock Issued				$        52,500.00
	Dividend Paid				$      (61,000.00)
	Net cash flow from financing activities					$       (8,500.00)
	Net cash flow from all activities					$    (17,075.00)
Add:	Beginning Cash Balance					$      46,500.00
	Ending Cash Balance					$      29,425.00

Workings:

	Cash Receipts from Customers
	Net Sales				$      674,600.00
Add:	Beginning A/R				$        78,500.00
Less:	Ending A/R				$        88,300.00
					$      664,800.00
	Cash Payments to Suppliers
	Cost of Goods Sold				$      400,800.00
Add:	Ending Inventory				$      183,000.00
Less:	Beginning Inventory				$      159,500.00
Add:	Beginning A/P				$        39,500.00
Less:	Ending A/P				$        42,700.00
					$      421,100.00

	Interest Payments
	Beginning Interest Payable
Less:	Ending Interest Payable
Add:	Interest Expense			$    5,800.00
				$    5,800.00
	Other Expense
	Operating Expense			$ 62,000.00	($ 98700 - $ 36700)
Add:	Ending Prepaid			$    5,800.00
Less:	Beginning Prepaid			$    7,300.00
				$ 60,500.00

Depreciation for the year =			Ending Balance of Accumu. Dep - Beginning Balance of Accu. Dep
		=	$ 76200 - $ 39500
		=	$ 36,700.00

	Income Tax Payments
	Beginning Income Tax Payable			$   6,800.00
Less:	Ending Income Tax Payable			$   3,000.00
Add:	Income Tax Expense			$ 37,375.00
				$ 41,175.00

	Dividend
	Opening balance of Retained Earnings			$ 232,200.00
Add:	Net Income			$ 112,125.00
Less:	Closing balance of Retained Earnings			$(281,825.00)
		Dividend Declared		$    62,500.00
Add:	Beginning Dividend Payable			$      5,800.00
Less:	Ending Dividend Payable			$     (7,300.00)
		Dividend Paid		$    61,000.00