Question

Blaylock Company provided the following partial comparative balance sheets and the income statement for 2016.

Blaylock Company

Comparative Balance Sheets

At December 31, 2015 and 2016

1		2015	2016
2	Current assets:
3	Accounts receivable	$750,000.00	$582,500.00
4	Inventories	300,000.00	320,000.00
5	Long-term assets:
6	Plant and equipment	2,200,000.00	2,150,000.00
7	Accumulated depreciation	(1,200,000.00)	(1,270,000.00)
8	Land	1,000,000.00	1,437,500.00
9	Current liabilities:
10	Wages payable	$700,000.00	$515,000.00
11	Long-term liabilities:
12	Bonds payable	0.00	385,000.00
13	Mortgage payable	100,000.00	0.00
14	Common stock	375,000.00	375,000.00
15	Paid-in capital in excess of par	280,000.00	280,000.00
16	Retained earnings	1,825,000.00	2,325,000.00

Blaylock Company

Income Statement

For the Year Ended December 31, 2016

1	Revenues	$3,000,000.00
2	Gain on sale of equipment	100,000.00
3	Less: Cost of goods sold	(1,920,000.00)
4	Less: Depreciation expense	(270,000.00)
5	Less: Interest expense	(10,000.00)
6	Net income	$900,000.00

	Required:
1.	Prepare a statement of cash flows for Blaylock for 2016.

Answer 1

	Blaylock Company
	Statement of Cash Flows
	For the Year Ended December 31, 2016
	Cash flows from operating activities:
	Net income		900000
	Add (deduct) adjusting items:
	Depreciation expense	270000
	Interest expense	10000
	Gain on sale of equipment	-100000	180000
	Changes in working capital
	Decrease in Accounts receivable
	(750000-582500)	167500
	Increase inventories
	(300000-320000)	-20000
	Decrease in wage payables
	(700000-515000)	-185000	-37500
	Cash flows from investing activities:
	Plant and equipment sale
	(2200000-1200000)-(2150000-1270000)	-50000
	Purchase of land
	(1000000-1437500)	-437500	-487500
	Cash flows from financing activities:
	Bonds payable
	(0-385000)	385000
	Mortgage payable
	(100000-0)	-100000
	Interest paid	-10000
	dividend paid	-400000	-125000
	Net cashflows		430000
	Opening cash flows		230000
	Closing cash flows		660000
	Working notes
1		2015	2016
2	Current assets:
3	Accounts receivable	$750,000.00	$582,500.00
4	Inventories	300,000.00	320,000.00
5	Long-term assets:
6	Plant and equipment	2,200,000.00	2,150,000.00
7	Accumulated depreciation	-1,200,000.00	-1,270,000.00
8	Land	1,000,000.00	1,437,500.00
	TOTAL	3,050,000.00	3,220,000.00
9	Current liabilities:
10	Wages payable	$700,000.00	$515,000.00
11	Long-term liabilities:
12	Bonds payable	0	385,000.00
13	Mortgage payable	100,000.00	0
14	Common stock	375,000.00	375,000.00
15	Paid-in capital in excess of par	280,000.00	280,000.00
16	Retained earnings	1,825,000.00	2,325,000.00
	Total liabilities	3,280,000.00	3,880,000.00
	Cash (Balance)	230,000.00	660,000.00
	depreciation
				Op bal	1200000
	Plant & equip	200000
				P & l	270000
	Cl balance	1270000
		1470000			1470000
	Plant and equipment sale
	Op bal		2200000
	P & L		100000		200000
	Purchase	(Bal)	50000	Cl balance	2150000
			2350000		2350000