Question

The comparative balance sheets for 2021 and 2020 and the statement of income for 2021 are given below for Dux Company. Additional information from Dux’s accounting records is provided also.

DUX COMPANY Comparative Balance Sheets December 31, 2021 and 2020 ($ in thousands)
	2021				2020
Assets
Cash	$	129.0			$	36.0
Accounts receivable		64.0				66.0
Less: Allowance for uncollectible accounts		(5.0	)			(4.0	)
Dividends receivable		19.0				18.0
Inventory		71.0				66.0
Long-term investment		31.0				26.0
Land		86.0				40.0
Buildings and equipment		161.0				266.0
Less: Accumulated depreciation		(6.0	)			(130.0	)
	$	550.0			$	384.0
Liabilities
Accounts payable	$	29.0			$	36.0
Salaries payable		18.0				21.0
Interest payable		20.0				18.0
Income tax payable		23.0				24.0
Notes payable		46.0				0
Bonds payable		91.0				50.0
Less: Discount on bonds		(2.0	)			(3.0	)
Shareholders' Equity
Common stock		210.0				200.0
Paid-in capital—excess of par		24.0				20.0
Retained earnings		99.0				18.0
Less: Treasury stock		(8.0	)			0
	$	550.0			$	384.0

DUX COMPANY Income Statement For the Year Ended December 31, 2021 ($ in thousands)
Revenues
Sales revenue	$	440.0
Dividend revenue		19.0		$	459.0
Expenses
Cost of goods sold		152.0
Salaries expense		57.0
Depreciation expense		2.0
Bad debt expense		1.0
Interest expense		40.0
Loss on sale of building		35.0
Income tax expense		48.0			335.0
Net income				$	124.0

Additional information from the accounting records:

1. A building that originally cost $168,000, and which was three-fourths depreciated, was sold for $7,000.
2. The common stock of Byrd Corporation was purchased for $5,000 as a long-term investment.
3. Property was acquired by issuing a 13%, seven-year, $46,000 note payable to the seller.
4. New equipment was purchased for $63,000 cash.
5. On January 1, 2021, bonds were sold at their $41,000 face value.
6. On January 19, Dux issued a 5% stock dividend (1,000 shares). The market price of the $10 par value common stock was $14 per share at that time.
7. Cash dividends of $29,000 were paid to shareholders.
8. On November 12, 12,500 shares of common stock were repurchased as treasury stock at a cost of $8,000.

Required:
Prepare the statement of cash flows for Dux Company using the indirect method. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands (i.e., 10,000 should be entered as 10).)

Answer 1

Solution:

Dux Company
Statement of Cash Flows
For year ended December 31, 2021
Particulars	Details	Amount (In'000)
Cash Flow from Operating Activities:
Net Income	$124.00
Adjustments to reconcile net income to net cash provided by operations:
Depreciation Expense	$2.00
Loss on sale of building	$35.00
Bad debts expense	$1.00
Decrease in accounts receivables ($66-$64)	$2.00
Increase in dividend receivables ($19-$18)	-$1.00
Increase in inventory ($71 - $66)	-$5.00
Decrease in accounts payable ($36 - $29)	-$7.00
Decrease in Salaries payable ($21 - $18)	-$3.00
Increase in interest payable ($20 - $18)	$2.00
Decrease in income tax payable ($24 - $23)	-$1.00
Decrease in discount on bond ($3 - $2)	$1.00
Net Cash provided by operating activities		$150.00
Cash Flow from Investing Activities:
Cash paid for purchase on investment	-$5.00
Cash paid for purchase of equipment	-$63.00
Proceed from sale of building	$7.00
Net Cash used in Investing activities		-$61.00
Cash Flow from Financing Activities:
Proceed from issue of bond	$41.00
Dividend Paid	-$29.00
Cash paid of repurchase of common stock	-$8.00
Net Cash Provided by financing activities		$4.00
Net Increase / (Decrease) in Cash		$93.00
Cash balance at beginning of year		$36.00
Cash balance at end of year		$129.00
Non Cash investing and financing activities:
Purchase of Property by issue of note		$46.00