Question

Problem 23-4

Blossom Company had the following information available at the end of 2017.

BLOSSOMCOMPANY COMPARATIVE BALANCE SHEETS AS OF DECEMBER 31, 2017 AND 2016
		2017			2016
Cash		$9,930			$4,010
Accounts receivable		20,450			12,910
Short-term investments		22,070			30,030
Inventory		42,300			35,310
Prepaid rent		3,020			12,090
Prepaid insurance		2,090			90
Supplies		1,010			75
Land		124,270			175,470
Buildings		353,500			353,500
Accumulated depreciation—buildings		(105,150	)		(87,890	)
Equipment		526,140			396,090
Accumulated depreciation—equipment		(129,450	)		(111,310	)
Patents		45,390			49,550
Total assets		$915,570			$869,925
Accounts payable		$21,800			$32,080
Income taxes payable		5,020			3,970
Salaries and wages payable		4,950			3,000
Short-term notes payable		10,060			10,060
Long-term notes payable		60,060			69,370
Bonds payable		397,380			397,380
Premium on bonds payable		30,200			32,145
Common stock		239,140			221,530
Paid-in capital in excess of par—common stock		24,850			17,400
Retained earnings		122,110			82,990
Total liabilities and stockholders’ equity		$915,570			$869,925

BLOSSOM COMPANY INCOME STATEMENT AND DIVIDEND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2017
Sales revenue					$1,157,060
Cost of goods sold					748,200
					408,860
Gross margin
Operating expenses
Selling expenses		$78,550
Administrative expenses		156,290
Depreciation/Amortization expense		39,560
Total operating expenses					274,400
Income from operations					134,460
Other revenues/expenses
Gain on sale of land		7,950
Gain on sale of short-term investment		3,980
Dividend revenue		2,380
Interest expense		(51,810	)		(37,500	)
Income before taxes					96,960
Income tax expense					39,460
Net income					57,500
Dividends to common stockholders					(18,380	)
To retained earnings					$39,120

1 - Prepare a statement of cash flows for Blossom Company using the direct method accompanied by a reconciliation schedule. Assume the short-term investments are debt securities, classified as available-for-sale. (Show amounts in the investing and financing sections that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

2- Reconciliation Schedule

Answer 1

1.

Blossom Company
Statement of Cash Flows
For the year ended December 31, 2017
	$	$
Cash Flows from Operating Activities
Cash receipts from customers	1,149,520
Cash paid to suppliers of inventory	(765,470)
Cash paid for operating expenses	(226,755)
Cash paid for income taxes	(38,410)
Net Cash Flows from Operating Activities		118,885
Cash Flows from Investing Activities
Dividend Revenue	2,380
Cash received from sale of land	59,150
Cash received from sale of short term investments	11,940
Cash paid for acquiring equipment	(130,050)
Net cash used in Investing Activities		(56,580)
Cash Flows from Financing Activities
Cash received from the issuance of common stock	25,060
Cash paid for retiring long term notes payable	(9,310)
Cash paid for dividends	(18,380)
Cash paid for interest	(53,755)
Net cash used in Financing Activities		(56,385)
Net increase in cash		5,920
Cash, December 31, 2016		4,010
Cash, December 31, 2017		9,930