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	$	47			$	27
Accounts receivable		51				61
Less: Allowance for uncollectible accounts		(3	)			(2	)
Dividends receivable		5				4
Inventory		69				57
Long-term investment		29				17
Land		96				50
Buildings and equipment		218				264
Less: Accumulated depreciation		(32	)			(64	)
	$	480			$	414
Liabilities
Accounts payable	$	20			$	34
Salaries payable		5				8
Interest payable		7				6
Income tax payable		14				16
Notes payable		46				0
Bonds payable		109				77
Less: Discount on bonds		(9	)			(17	)
Shareholders' Equity
Common stock		217				207
Paid-in capital—excess of par		28				27
Retained earnings		58				56
Less: Treasury stock		(15	)			0
	$	480			$	414

DUX COMPANY Income Statement For Year Ended December 31, 2018 ($ in 000s)
Revenues
Sales revenue	$	261
Dividend revenue		6		$	267
Expenses
Cost of goods sold		127
Salaries expense		32
Depreciation expense		19
Bad debt expense		1
Interest expense		15
Loss on sale of building		3
Income tax expense		24			221
Net income				$	46

Additional information from the accounting records:

A building that originally cost $68,000, and which was three-fourths depreciated, was sold for $14,000.

The common stock of Byrd Corporation was purchased for $12,000 as a long-term investment.

Property was acquired by issuing a 15%, seven-year, $46,000 note payable to the seller.

New equipment was purchased for $22,000 cash.

On January 1, 2018, bonds were sold at their $32,000 face value.

On January 19, Dux issued a 4% stock dividend (1,000 shares). The market price of the $10 par value common stock was $11 per share at that time.

Cash dividends of $33,000 were paid to shareholders.

On November 30,000 shares of common stock were repurchased as treasury stock at a cost of $15,000.

Required:
Prepare the statement of cash flows for Dux Company using the indirect method. (Do not round intermediate calculations. Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands. (i.e., 10,000 should be entered as 10).))

Answer 1

Cash flow statement

A . Cash flow from operating activities
Difference in retained earnings (58-56)		2000
Adj. For
Bonds discount written .off	8
Cash dividend	33
Stock dividend (10+1)	11
Loss on sale of building	3
Income tax exp.	24
Bad debt exp.	1
Dep. Exp.	19
Dividend revenue	(6)
Interest exp.	15	108
Decrease in accounts receivable	10
Increase in inventory	(12)
Decrease in accounts payable	(14)
Decrease in salaries payable	(3)	(19)
Cash flow from operating activitied before income tax		91
Less : income tax paid ( note 1)		(26)
Cash generated from operating activities (A)		65
B. Cash flow from investing activities
Proceeds from sale of building	14
Dividend revenue (note 2)	5
Purchase of equipment	(22)
Purchase of long term investment	(12)
Cash outflow from investing activities (B)		(15)
C. Cash flow from financing activities
Proceeds from bonds issue	32
Cash dividend paid	(33)
Purchase of treasury stock	(15)
Interest paid (note 3)	(14)
Cash outflow from financing activities (C)		(30)
Total cash flow during year (A+B+C)		20
Beginning Cash balance		27
Ending Cash balance		47

Note :-

1 Income tax

To cash (bal fig)	26	bal b/d	16
Bal c/d	14	income tax exp	24

Thus, income tax paid for the year is $26.

2. Dividend receivable

Bal b/d	4	by cash (bal fig.)	5
To div. Revenue	6	by bal c/d	5

Therefore div received in cash is $5

3 . Interest payable

To cash (bal fig)	14	bal b/d	6
Bal c/d	7	int. Exp.	15

Therefore int. Paid during the year is $14.