Question

The comparative balance sheet of Cromme Inc. for December 31, 2016 and 2015, is shown as follows:

1		Dec. 31, 2016	Dec. 31, 2015
2	Assets
3	Cash	$626,170.00	$585,760.00
4	Accounts receivable (net)	227,840.00	208,880.00
5	Inventories	641,390.00	616,790.00
6	Investments	0.00	240,820.00
7	Land	327,380.00	0.00
8	Equipment	704,290.00	554,020.00
9	Accumulated depreciation-equipment	(167,160.00)	(148,930.00)
10	Total assets	$2,359,910.00	$2,057,340.00
11	Liabilities and Stockholders’ Equity
12	Accounts payable (merchandise creditors)	$424,670.00	$404,080.00
13	Accrued expenses payable (operating expenses)	43,080.00	52,050.00
14	Dividends payable	24,920.00	19,300.00
15	Common stock, $4 par	140,000.00	102,000.00
16	Paid-in capital: Excess of issue price over par—common stock	417,400.00	280,600.00
17	Retained earnings	1,309,840.00	1,199,310.00
18	Total liabilities and stockholders’ equity	$2,359,910.00	$2,057,340.00

Additional data obtained from an examination of the accounts in the ledger for 2016 are as follows:

A.	The investments were sold for $279,890 cash.
B.	Equipment and land were acquired for cash.
C.	There were no disposals of equipment during the year.
D.	The common stock was issued for cash.
E.	There was a $206,210 credit to Retained Earnings for net income.
F.	There was a $95,680 debit to Retained Earnings for cash dividends declared.

Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. In the operating activities section, use the minus sign to indicate cash outflows, decreases in cash and a net cash outflow, if required. In the investing and financing activities section, use a minus sign only to indicate a NET cash outflow for the section.

X

Statement of Cash Flows

Answer 1

Cromme Inc.

Statement of cash flows

For the year ended December 31, 2016

I. Cash flows from operating activities
Net income	206,210
Depreciation on equipment	18,230
Gain on sale of investment	- 39,070
Operating profit before working capital changes
Increase in Accounts receivables	- 18,960
Increase in Inventories	- 24,600
Increase in Accounts payable	20,590
Decrease in Accrued expenses payable	- 8,970
Net cash flows from operating activities		153,430
II. Cash flows from Investing activities
Sale of investments	279,890
Purchase of Land	(327,380)
Purchase of equipment	(150,270)
Net cash used in investing activities		- 197,760
III. Cash flows from Financing Activities
Cash dividend paid	(90,060)
Issue of common stock (38,000 + 136,800)	174,800
Net cash flows from Financing activities		84,740
Net increase in cash (I + II + III)		40,410
Add: Opening balance of cash		585,760
Closing balance of cash		626,170

Working note:

Dividend payable Account

Cash dividend paid (Bal.fig.)	90,060	Balance b/d	19,300
Balance c/d	24,920	Dividend declared	95,680
	114,980		114,980