Question

Following are selected balance sheet accounts of Headland Bros. Corp. at December 31, 2020 and 2019, and the increases or decreases in each account from 2019 to 2020. Also presented is selected income statement information for the year ended December 31, 2020, and additional information.

Selected balance sheet accounts
Assets		2020			2019			Increase (Decrease)
Accounts receivable		$33,800			$23,900			$9,900
Property, plant, and equipment		278,600			247,600			31,000
Accumulated depreciation—plant assets		(177,600	)		(165,700	)		(11,900	)
Liabilities and stockholders’ equity		2020			2019			Increase
Bonds payable		$ 48,800			$45,600			$3,200
Dividends payable		8,100			4,900			3,200
Common stock, $1 par		22,200			19,200			3,000
Additional paid-in capital		9,000			3,100			5,900
Retained earnings		103,300			91,500			11,800
Selected income statement information for the year ended December 31, 2020:
Sales revenue		$156,400
Depreciation		37,700
Gain on sale of equipment		14,500
Net income		31,200

Additional information:

1.		During 2020, equipment costing $45,000 was sold for cash.
2.		Accounts receivable relate to sales of merchandise.
3.		During 2020, $20,200 of bonds payable were issued in exchange for property, plant, and equipment. There was no amortization of bond discount or premium.

Determine the category (operating, investing, or financing) and the amount that should be reported in the statement of cash flows for the following items.

				Activity
(a)		Payments for purchase of property, plant, and equipment.		select a kind of activity                                                          FinancingInvestingOperating		$enter a dollar amount
(b)		Proceeds from the sale of equipment.		select a kind of activity                                                          FinancingInvestingOperating		$enter a dollar amount
(c)		Cash dividends paid.		select a kind of activity                                                          FinancingInvestingOperating		$enter a dollar amount
(d)		Redemption of bonds payable.		select a kind of activity                                                          FinancingInvestingOperating		$enter a dollar amount

Answer 1

Answer-

a	Payments for purchase of property, plant, and equipment	Investing	$76000
b	Proceeds from the sale of equipment.	Investing	$33700
c	Cash dividends paid	Financing	$19400
d	Redemption of bonds payable	Financing	$17000

Explanation-a)-

Payments for purchase of property, plant, and equipment
Particulars	Amount
	$
Closing balance of equipment	278600
Add- Cost of equipment sold	45000
Less- Beginning balance of equipment	247600
Purchase of equipment	76000

b)- Proceeds from sale of equipment = Book value of equipment on the date of sale+ Gain on sale of equipment

= $19200+$14500

= $33700

Where- Book value of equipment on the date of sale= Cost of equipment- Accumulated depreciation of equipment

= $45000-$25800

= $19200

c)-

Cash Dividends paid
Particulars	Amount
	$
Beginning balance of retained earnings	91500
Add- Net income	31200
Ending balance of retained earnings	103300
Cash Dividends paid	19400

d)-

Redemption of bonds payable
Particulars	Amount
	$
Opening balance of bonds payable	45600
Add- Bonds issued	20200
Less- Ending balance of bonds payable	48800
Bonds payable paid	17000