Question

You are the accountant for Smart Construction Company, a large construction company in Colorado. You have been presented with the following
financial information for Smart and asked to prepare the Statement of Cash Flows for the year ended June 30, 2017. You will complete all work for
the project in this excel file, which includes the following tabs:
1. Facts - Information taken from Smart's accounting records and additional information regarding the cash flows as of June 30, 2017.
2. Worksheet - Worksheet template (also see Example 21.3a in text).
3. Cash Flows - Statement of Cash Flows template (also see Example 21.3b in text).
						Account Balances
						June 30, 2016	June 30, 2017
	Debits
	Cash					$       361,700	$       880,550
	Accounts Receivable					100,000	125,000
	Marketable Securities (at cost)					11,700	13,000
	Allowance for Change in Value					1,500	1,800
	Construction in Process					168,750	405,000
	Prepaid Expenses					45,000	10,000
	Investments (long-term)					-	13,500
	Leased Equipment					-	20,000
	Building					30,000	-
	Deferred tax asset					5,375	2,200
	Land					10,500	10,500
	Discount on Bonds Payable					-	1,305
	Totals					734,525	1,482,855
	Credits
	Allowance for doubtful accounts					$           6,000	$           4,500
	Accounts Payable					87,500	210,000
	Deferred tax liability					1,000	3,300
	Income Taxes Payable					3,500	9,000
	Note Payable (long-term)					3,500	-
	Accumulated Depreciation on Building					2,500	-
	Accumulated Depreciation on Leased Asset					-	3,000
	Lease obligation					-	18,000
	Interest payable on lease obligation					-	1,800
	Interest payable (Bonds)					-	1,800
	Bonds payable					-	45,000
	Billings on contruction in process					150,000	325,000
	Pension liability					150,000	400,000
	Convertible preferred stock, $100 par					9,000	-
	Common Stock, $10 par					14,000	24,500
	Additional Paid-in Capital					8,700	13,700
	Unrealized Increase in Value of Marketable Securities					1,500	1,800
	Retained Earnings					297,325	421,455
	Totals					734,525	1,482,855
	Additional information:
	a. Dividends declared and paid totaled $650.
	b. 300 shares of common stock (at par) were issued for cash.
	c. On July 1, 2016, convertible preferred stock that had originally been issued at par value were
	converted into 500 shares of common stock. The book value method was used to account for the
	conversion.
	d. The long-term note payable was paid by issuing 250 shares of common stock at the beginning of the
	fiscal year.
	e. Short-term marketable securities were purchased at a cost of $1,300. The portfolio was increased by
	$300 to a $14,800 fair value at year-end by adjusting the related allowance account.
	f. During the year, a 30% interest in Ricochet Co. was purchased as an investment for $9,500. Ricochet
	reported $20,000 in net income for the year and paid dividends of $2,000 to Smart.
	g. $5,000 of accounts receivable were written off as uncollectible during the year.
	h. Smart’s inventory consists of Construction-in-Process in excess of the Billings on
	Construction-in-Process account balance.
	i. A building was destroyed by fire during the year and insurance proceeds of $26,000 were collected.
	j. The 12% bonds payable were issued on February 28, 2017, at 97. They mature on February 28, 2027.
	The company uses the straight-line method to amortize bond premiums and discounts.
	k. Smart recorded pension expense of $350,000 for the year.
	l. A lease agreement was signed on July 1st, 2016 for the use of equipment worth $20,000. The
	company determined that the transaction should be recorded as a capital lease.

Answer 1

Particulars	Amount($)
Net Income	124130
Adjustments for non cash items
Add- Provision for tax	10975
Add- Interest on lease	1800
Add- Interest payable on bonds	1800
Add- Loss on discount on issue of bonds	1350
Add- Net Loss (30-60k) building destroyed	4000
Add- Depreciation	3000
Less- Allowance for change in provision	-2500
Less- Accumlated Dep on Building	-300
Add- Provision for dividend	650
Pension Liability
Add- Charge to Pension liability	350000
Less- Pension liability actually paid	-100000
Less- Profit of Ricochet Co included	-6000
Add- Bills on construction in process	175000
Less- Provision for DD for the year	-3500
Add- increase in value of marketable securities	300
Total	560705
Adjustments from cash flow effect from working capital items:
Add- increase in accounts payable	122500
Add- decrease in prepaid expense	35000
Less- Increase in accounts receivable	-30000
Net cash provided (used) by operating activities	688205
Cash flow from investing activities
Less - Building Destroyed	-26000
Add-Lease Equipment	18000
Add - Investment made	9500
Less - Increase in MS	-1300
Add- Dividends from Ricochet	2000
Net cash used for Investing Activities	2200
Cash flow from Financing activities	219050
dd-Common Stock	3000
Add-Cash raised from Issue of bonds	43650
Less- Lease liability paid for the year	-2000
Decrease in Note Payable
Less- discount on bonds payable	-1305
Less- Dividend paid	-650
Net cash used for Financing Activities	42695
Net increase in cash	518850
Cash,30 June 2016	361700
Cash,30 June 2017	880550