Question

Golden Corp., a merchandiser, recently completed its 2018 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, (5) Other Expenses are all cash expenses, and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes. The company’s balance sheets and income statement follow. GOLDEN CORPORATION Comparative Balance Sheets December 31, 2018 and 2017 2018 2017 Assets Cash $ 164,000 $ 107,000 Accounts receivable 83,000 71,000 Inventory 601,000 526,000 Total current assets 848,000 704,000 Equipment 335,000 299,000 Accum. depreciation—Equipment (158,000 ) (104,000 ) Total assets $ 1,025,000 $ 899,000 Liabilities and Equity Accounts payable $ 87,000 $ 71,000 Income taxes payable 28,000 25,000 Total current liabilities 115,000 96,000 Equity Common stock, $2 par value 592,000 568,000 Paid-in capital in excess of par value, common stock 196,000 160,000 Retained earnings 122,000 75,000 Total liabilities and equity $ 1,025,000 $ 899,000 GOLDEN CORPORATION Income Statement For Year Ended December 31, 2018 Sales $ 1,792,000 Cost of goods sold 1,086,000 Gross profit 706,000 Operating expenses Depreciation expense $ 54,000 Other expenses 494,000 548,000 Income before taxes 158,000 Income taxes expense 22,000 Net income $ 136,000 Additional Information on Year 2018 Transactions Purchased equipment for $36,000 cash. Issued 12,000 shares of common stock for $5 cash per share. Declared and paid $89,000 in cash dividends. Required: Prepare a complete statement of cash flows; report its cash inflows and cash outflows from operating activities according to the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Answer:-a)-

Golden Corporation
Statement of Cash Flow (Using Indirect Method)
For the year ended December,2018
Particulars		Amount
		$
Cash flow from operating activities
Net Income		136000
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation		54000
Change in operating assets & liabilities
Increase in accounts receivable		-12000
Increase in inventory		-75000
Increase in accounts payable		16000
Increase in income tax payable		3000
Net cash flow from operating activities (a)		122000

b)-

Golden Corporation
Statement of Cash Flow (Using Indirect Method)
For the year ended December,2018
Particulars		Amount
		$
Cash flow from operating activities
Net Income		136000
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation		54000
Change in operating assets & liabilities
Increase in accounts receivable		-12000
Increase in inventory		-75000
Increase in accounts payable		16000
Increase in income tax payable		3000
Net cash flow from operating activities (a)		122000
Cash Flow from Financing activities
Dividend paid		-89000
Common stock issued		60000
Net cash Flow from Financing activities (b)		-29000
Cash Flow from Investing activities
Purchase of equipment		-36000
Net cash Flow from Investing activities (c)		-36000
Net Change in cash c=a+b+c		57000
Beginning cash balance		107000
Closing cash balance		164000