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

$

121

$

40

Accounts receivable

43

71

Less: Allowance for uncollectible accounts

(5

)

(4

)

Dividends receivable

4

3

Inventory

100

95

Long-term investment

54

50

Land

95

85

Buildings and equipment

162

200

Less: Accumulated depreciation

(38

)

(80

)

$

536

$

460

Liabilities

Accounts payable

$

46

$

82

Salaries payable

6

9

Interest payable

7

2

Income tax payable

5

6

Notes payable

10

0

Bonds payable

80

50

Less: Discount on bonds

(5

)

(6

)

Shareholders' Equity

Common stock

210

200

Paid-in capital—excess of par

24

20

Retained earnings

163

97

Less: Treasury stock (at cost)

(10

)

0

$

536

$

460

DUX COMPANY
Income Statement
For the Year Ended December 31, 2018
($ in 000s)

Revenues

Sales revenue

$

400

Dividend revenue

4

$

404

Expenses

Cost of goods sold

220

Salaries expense

38

Depreciation expense

9

Bad debt expense

1

Interest expense

10

Loss on sale of building

2

Income tax expense

31

311

Net income

$

93

Additional information from the accounting records:

A building that originally cost $68,000, and which was three-fourths depreciated, was sold for $15,000.

The common stock of Byrd Corporation was purchased for $4,000 as a long-term investment.

Property was acquired by issuing a 15%, seven-year, $10,000 note payable to the seller.

New equipment was purchased for $30,000 cash.

On January 1, 2018, bonds were sold at their $30,000 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 $14 per share at that time.

Cash dividends of $13,000 were paid to shareholders.

On November 12, 1,000 shares of common stock were repurchased as treasury stock at a cost of $10,000.

Required:
Prepare the statement of cash flows of Dux Company for the year ended December 31, 2018. Present cash flows from operating activities by the direct method. (Do not round your intermediate calculations. Enter your answers in thousands (i.e., 5,000 should be entered as 5). Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Preparation of cash flow of DUX Company for the year ended 31st december, 2018. (Direct method):

Particulars	$ in '000
Operating activity
Cash Received from customers ( Working Note:1)	429
Cash received from dividends (Working Note:4)	3
Less:
Cash paid to suppliers for inventory (Working Note:3)	-261
Operating Expenses paid ( Working Note:2)	-78
A: Cash from/ (To) operating activity	93
Investing activity
sale of buliding	15
Less:
Purchase of investment	-4
Purchase of equipment	-30
B: Cash from/ (To) Investing activity	-19
Financing activity
Sale of bonds payable	30
Purchase of treasury stock	-10
Dividends paid	-13
C: Cash from/ (To) Financing activity	7
Cash & Cash equlance from/ (To) all the activities (A+B+C)	81
Add: Opening cash balance	40
Ending Cash balance	121

The following are the working notes for the reference:

Working Note: 1	$ in 000
Opening bal of Accounts Recevable	71
Add: End bal of allow, for doubt, debt.,	5
Add: Sales revenue for the year	400
less: End bal of accounts receivable	-43
Less: opening bal of allow, for doubt, debt.,	-4
Cash Received from customers	429
Working Note: 2	$ in 000
Opening bal of salaries payables	9
Opening bal of Interest payables	2
Opening bal of Income taxpayables	6
Add: Expenses in the year
Salaries	38
Income tax	31
Interest	10
Less:
End bal of salaries payables	-6
End bal of Interest payables	-7
End bal of Income taxpayables	-5
Operating Expenses paid	78
Working Note: 3	$ in 000
Cost of goods sold	220
Add: Ending inventory	100
Less: Beginning Inventory	-95
Goods purchased	225
Add: Opening bal of accounts payable	82
Less: End bal of accounts payable	-46
Cash paid to suppliers for inventory	261
Working Note: 4	$ in 000
Opening bal of Dividend revenue	3
Add: Dividend revenue for the year	4
less: End bal of Dividend revenue	-4
Cash received from dividends	3