Question

Year-End Balance Sheet and Statement of Cash Flows–Indirect Method

The balance sheet of Poodle Company at the end of 2016 is presented here, along with certain other information for 2017:

	December 31, 2016

Cash	$155,000
Accounts receivable	140,000
Total current assets	$295,000
Land	$100,000
Plant and equipment	700,000
Accumulated depreciation	(175,000)
Investments	125,000
Total long-term assets	$750,000
Total assets	$1,045,000
Current liabilities	$325,000
Bonds payable	$100,000
Common stock	$500,000
Retained earnings	120,000
Total stockholders’ equity	$620,000
Total liabilities and stockholders’ equity	$1,045,000

Other information is as follows:

Net income for 2017 was $50,000.

Included in operating expenses was $25,000 in depreciation.

Cash dividends of $40,000 were declared and paid.

An additional $50,000 of common stock was issued for cash.

Bonds payable of $100,000 were purchased for cash and retired at no gain or loss.

Cash purchases of plant and equipment during the year were $60,000.

An additional $200,000 of land was acquired in exchange for a long-term note payable.

During the year, sales exceeded cash collections on account by $15,000. All sales are on account.

The amount of current liabilities decreased by $20,000 during the year.

Required:

1. Prepare a statement of cash flows for 2017 using the indirect method in the Operating Activities section. Include a supplemental schedule for noncash activities. Use the minus sign to indicate cash payments, cash outflows, or decreases in cash.

Poodle Company
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash Flows from Operating Activities
Cash collected from customers	$
Adjustments to reconcile net income to net cash provided by operating activities:
Accumulated depreciation
	$
Cash Flows from Investing Activities
	$
Cash Flows from Financing Activities
	$
	$
	$
Cash balance, December 31, 2016
Cash balance, December 31, 2017	$
Schedule of Noncash Investing and Financing Activities
	$

2. Prepare a balance sheet at December 31, 2017.

Poodle Company
Balance Sheet
December 31, 2017
	$
Total current assets	$
	$
Total long-term assets	$
Total assets	$
	$
	$
	$
Total stockholders' equity	$
Total liabilities and stockholders' equity	$

3. What primary uses did Poodle make of the cash it generated from operating activities?

Answer 1

Poodle Company
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash Flow from Operating Activities:
Net Income		$      50,000.00
Add: Adjustments
Depreciation	$      25,000.00
Increase in Accounts Receivables	$    (15,000.00)
Decrease in Current Liabilities	$    (20,000.00)
		$    (10,000.00)
A. Cash Flow from Operating Activities		$      40,000.00
Cash Flow from Investing Activities:
Purchase of Plant and Equipment	$    (60,000.00)
B. Cash Used in Investing Activities		$    (60,000.00)
Cash Flow from Financing Activities:
Retirement of Bonds	$ (100,000.00)
Dividend Paid	$    (40,000.00)
Issue of Common stock in Cash	$      50,000.00
C. Cash Flow from Financing Activities		$    (90,000.00)
Increase (Decrease) in cash [A+B+C]		$ (110,000.00)
Add: Cash balance, December 31, 2016		$    155,000.00
Cash balance, December 31, 2017		$      45,000.00

Poodle Company
Balance Sheet
As at December 31, 2017
Assets
Current Assets
Cash		$        45,000.00
Accounts Receivables		$      155,000.00
Total Current Assets		$      200,000.00
Equipment	$ 760,000.00
Less-Accumulated Depreciation	$ 200,000.00	$      560,000.00
Land		$      300,000.00
Investments		$      125,000.00
Total Long Term Assets		$      985,000.00
Total Assets		$ 1,185,000.00
Liabilities
Current Liabilities		$      305,000.00
Notes Payable Long term		$      200,000.00
Total Liabilities		$      505,000.00
Owner's Equity
Common Stock		$      550,000.00
Retained Earnings		$      130,000.00
Total Liability and Owner's Equity		$ 1,185,000.00

Retained Earnings Closing Balance

Opening Balance	$ 120,000.00
Add: Profits during Year	$    50,000.00
Less: Dividends Paid	$    40,000.00
Closing Balance	$ 130,000.00

The question says Sales exceeds the amount of collections and if all sales are on credit then $15000 of sales has not yet been collected so accounts receivables balance is increased by $15000.

Schedule of Non cash Investing and Financing Activities

Non Cash Investing Activities.
Purchase of Land in exchange of Notes Payable	$ 200,000.00
Non Cash Financing Activities.
Issue of notes payable in exchange of Land asset	$ 200,000.00

Poodle primarily used Cash from operations to buy Equipment.