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	$	49			$	28
Accounts receivable		52				63
Less: Allowance for uncollectible accounts		(4	)			(3	)
Dividends receivable		6				3
Inventory		71				58
Long-term investment		31				18
Land		110				60
Buildings and equipment		217				266
Less: Accumulated depreciation		(33	)			(66	)
	$	499			$	427
Liabilities
Accounts payable	$	21			$	36
Salaries payable		6				10
Interest payable		8				5
Income tax payable		15				16
Notes payable		50				0
Bonds payable		111				78
Less: Discount on bonds		(10	)			(19	)
Shareholders' Equity
Common stock		218				208
Paid-in capital—excess of par		30				28
Retained earnings		66				65
Less: Treasury stock		(16	)			0
	$	499			$	427

DUX COMPANY Income Statement For Year Ended December 31, 2018 ($ in 000s)
Revenues
Sales revenue	$	270
Dividend revenue		8		$	278
Expenses
Cost of goods sold		128
Salaries expense		33
Depreciation expense		21
Bad debt expense		1
Interest expense		16
Loss on sale of building		6
Income tax expense		25			230
Net income				$	48

Additional information from the accounting records:

A building that originally cost $72,000, and which was three-fourths depreciated, was sold for $12,000.

The common stock of Byrd Corporation was purchased for $13,000 as a long-term investment.

Property was acquired by issuing a 15%, seven-year, $50,000 note payable to the seller.

New equipment was purchased for $23,000 cash.

On January 1, 2018, bonds were sold at their $33,000 face value.

On January 19, Dux issued a 5% stock dividend (1,000 shares). The market price of the $10 par value common stock was $12 per share at that time.

Cash dividends of $35,000 were paid to shareholders.

On November 32,000 shares of common stock were repurchased as treasury stock at a cost of $16,000.

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

SOLUTION

DUX Company

Cash flow statement

	Amount ($)	Amount ($)
Cash Flow from Operating Activities:
Net Income		48
Adjustments to reconcile-
Depreciation expense	21
Loss on building	6
Discount amortization	9
Changes in current assets and liabilities-
Decrease in accounts receivable	12
Increase in interest payable (8-5)	3
Increase in dividend receivable (6-3)	(3)
Increase in inventory (71-58)	(13)
Decrease in accounts payable (36-21)	(15)
Decrease in salaries payable (10-6)	(4)
Decrease in taxes payable (16-15)	(1)	15
Net cash flow from Operating activities (A)		63
Cash Flow from Investing Activities
Sale of Building	12
Purchase of long-term investment	(13)
Purchase of equipment	(23)
Purchase of land	(50)
Net cash used in investing activities (B)		(74)
Cash Flow from Financing Activities
Issued Bonds	33
Issued Notes	50
Paid Dividends	(35)
Purchased Treasury Stock	(16)
Net cash flow from financing activities (C)		32
Net change in cash (A+B+C)		21
Opening cash balance		28
Ending cash balance		49