Question

Shown below are comparative balance sheets for Schmitt Company.

SCHMITT COMPANY Comparative Balance Sheets December 31
Assets		2014			2013
Cash		$ 72,080			$ 23,320
Accounts receivable		93,280			80,560
Inventory		177,020			200,340
Land		84,800			106,000
Equipment		275,600			212,000
Accumulated depreciation—equipment		(69,960	)		(33,920	)
Total		$632,820			$588,300
Liabilities and Stockholders’ Equity
Accounts payable		$ 41,340			$ 45,580
Bonds payable		159,000			212,000
Common stock ($1 par)		228,960			184,440
Retained earnings		203,520			146,280
Total		$632,820			$588,300

Additional information:

1.		Net income for 2014 was $98,580.
2.		Depreciation expense was $36,040.
3.		Cash dividends of $41,340 were declared and paid.
4.		Bonds payable amounting to $53,000 were redeemed for cash $53,000.
5.		Common stock was issued for $44,520 cash.
6.		No equipment was sold during 2014.
7.		Land was sold for its book value.

Answer 1

Solution :

Cash flow Statement- Schmitt Company
Particulars	Details	Amount
Cash Flow from Operating Activities:
Net Income		$98,580.00
Adjustments to reconcile net income to cash flow from operating activities:
Depreciation	$36,040.00
Increase in Accounts Receivables ($93,280 - $80,560)	-$12,720.00
Decrease in Inventory ($200,340 - $177,020)	$23,320.00
Decrease in Accounts Payable ($45,580 - $41,340)	-$4,240.00
Total Adjustments		$42,400.00
Net Cash Flow From Operating Activites (A)		$140,980.00
Cash Flow from Investing Activities:
Sale of land ($106,000 - $84,800)	$21,200.00
Purchase of Equipment ($275,600 - $212,000)	-$63,600.00
Net Cash Flow From Investing Activites (B)		-$42,400.00
Cash Flow from Financing Activities:
Cash dividend paid	-$41,340.00
Redemption of bonds	-$53,000.00
Proceed from issue of common stock	$44,520.00
Net Cash Flow From Financing Activites (C)		-$49,820.00
Total Cash flow from all activities (A+B+C)		$48,760.00
Cash at the beginning of the year		$23,320.00
Cash at the end of year		$72,080.00