Question

Boca Inc.
Balance Sheets
December 31
	Assets							2018		2017
	Cash							110,800		48,400
	Accounts Receivable							38,000		87,800
	Inventory							112,500		102,850
	Prepaid Expenses							26,000		28,400
	Long-term Investments							109,000		138,000
	Plant Assets							397,000		242,500
	Accumulated depreciation							-50,000		-52,000
	Total							743,300		595,950
	Liabilities and Stockholders' Equity
	Accounts Payable							72,000		67,300
	Accrued Expenses Payable							13,500		21,000
	Dividends Payable							3,000		-
	Bonds Payable							170,000		146,000
	Common Stock							262,000		175,000
	Retained Earnings							222,800		186,650
	Total							743,300		595,950
Additional Information:
1. Old plant assets having an original cost of $57,500 and accumulated depreciation of $48,500
were sold for $1,500 cash.
2. A new plant asset was purchased directly in exchange for common stock valued at $42,000.
3. New bonds were issued at par for $60,000.
4. 2018 Net income was $154,480.
5. A $1,000 prior period adjustment was recorded in 2017 correcting an understatement of
depreciation in 2015. The 2017 balance sheet is appropriately restated.
6. The decrease in Long-term Investments was due to a sale of investments at original cost.
Required:
1. Prepare a 2018 statement of cash flows using the indirect method. Use the textbook
format (pages 1,339, 1,342, 1,345). Do not submit supporting computations.

Answer 1

Solution 1:

Statement of Cash Flows - Boca Inc For the year ended Dec 31, 2018
Particulars	Details	Amount
Cash Flow from Operating Activities:
Net Income		$154,480.00
Adjustments to reconcile net income to cash flow from operating activities:
Depreciation ($50,000 - $52,000 + $48,500 - $1,000)	$45,500.00
Loss on sale of plant assets	$7,500.00
Decrease in Accounts Receivables ($87,800 - $38,000)	$49,800.00
Increase in Inventory ($112,500 - $102,850)	-$9,650.00
Decrease in prepaid expenses ($28,400 - $26,000)	$2,400.00
Increase in Accounts payable ($72,000 - $67,300)	$4,700.00
Decrease in Accrued expneses payable ($21,000 - $13,500)	-$7,500.00
Total Adjustments		$92,750.00
Net Cash Flow From Operating Activites (A)		$247,230.00
Cash Flow from Investing Activities:
Sale of plant assets	$1,500.00
Sale of long term investment	$29,000.00
Purchase of Plant Assets ($397,000 - $242,500 + $57,500 - $42,000)	-$170,000.00
Net Cash Flow From Investing Activites (B)		-$139,500.00
Cash Flow from Financing Activities:
Dividend paid ($186,650 + $154,480 - $1,000 - $222,800 - $3,000)	-$114,330.00
Proceed from issue of bond	$60,000.00
Proceed from issue of common stock ($262,000 - $175,000 - $42,000)	$45,000.00
Repayment of bonds ($146,000 + $60,000 - $170,000)	-$36,000.00
Net Cash Flow From Financing Activites (C)		-$45,330.00
Total Cash flow from all activities (A+B+C)		$62,400.00
Cash at the beginning of the year		$48,400.00
Cash at the end of year		$110,800.00
Non Cash investing & Financing Activities:
Purchase of Plant Assets by Issuing common stock		$42,000.00