Question

The comparative balance sheets for 2018 and 2017 and the statement of income for 2018 are given below for Dux Company. Additional information from Dux's accounting records is provided also. DUX COMPANY Comparative Balance Sheets December 31, 2018 and 2017 ($ in 000s) 2018 2017 Assets Cash $ 94 $ 31 Accounts receivable 37 61 Less: Allowance for uncollectible accounts (4 ) (3 ) Dividends receivable 5 4 Inventory 55 50 Long-term investment 35 32 Land 50 40 Buildings and equipment 263 260 Less: Accumulated depreciation (35 ) (50 ) $ 500 $ 425 Liabilities Accounts payable $ 21 $ 39 Salaries payable 5 7 Interest payable 11 5 Income tax payable 9 11 Notes payable 10 0 Bonds payable 95 75 Less: Discount on bonds (1 ) (2 ) Shareholders' Equity Common stock 210 200 Paid-in capital—excess of par 24 20 Retained earnings 121 70 Less: Treasury stock (at cost) (5 ) 0 $ 500 $ 425 DUX COMPANY Income Statement For the Year Ended December 31, 2018 ($ in 000s) Revenues Sales revenue $ 310 Dividend revenue 5 $ 315 Expenses Cost of goods sold 175 Salaries expense 20 Depreciation expense 9 Bad debt expense 1 Interest expense 9 Loss on sale of building 1 Income tax expense 22 237 Net income $ 78 Additional information from the accounting records: A building that originally cost $32,000, and which was three-fourths depreciated, was sold for $7,000. The common stock of Byrd Corporation was purchased for $3,000 as a long-term investment. Property was acquired by issuing a 14%, seven-year, $10,000 note payable to the seller. New equipment was purchased for $35,000 cash. On January 1, 2018, bonds were sold at their $20,000 face value. 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. Cash dividends of $13,000 were paid to shareholders. On November 12, 500 shares of common stock were repurchased as treasury stock at a cost of $5,000. Required: Prepare the statement of cash flows of Dux Company for the year ended December 31, 2018. Present cash flows from operating activities by the direct method. (Do not round your intermediate calculations. Enter your answers in thousands (i.e., 5,000 should be entered as 5). Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Dux Company

Statement of cash flows direct method:

Dux Company
Statement of Cash Flows
For the year ended Dec 31, 2018
		(Amount in thousands)
Cash flows from operating activities:
cash inflows
from customers	$334
from dividends received	$5
Cash outflows
payment to suppliers	($198)
payment of salaries	($22)
interest payment	($3)
income tax payments	($24)
Net cash flow		$92
Cash flows from investing activities:
sale of building	$7
purchase of long-term investment	($3)
purchase of equipment	($35)
Net cash flow from investing activities		($31)
Cash flow from financing activities:
sale of bonds payable	$20
payment of cash dividend	($13)
purchase of treasury stock	($5)
Net cash flow from financing activities		$2
Net Increase in Cash		$63
Cash balance, Jan 1, 2018		$31
Cash balance, Dec 31, 2018		$94
Non-cash investing and financing activities:
Acquired land	$10

Note:

1. Receipts from customers = net sales + decrease in accounts receivable

= 310 + 24 = 334

1. Payment to customers = cost of goods sold + increase in inventory + decrease in accounts payable

= $175 + $5 + $18 = $198

1. Payment to employees = expense + decrease in payable

= 20 + (7-5) = 22

1. Payment for interest = expense - decrease in payable

= 9 – (11-5) = 3

1. Payment for income taxes = expense + increase in payable

= 22 + (11-9) = 24