Question

Complete the following questions. In addition to answering the items below, you must submit an analysis of the assignment. Analyze the specific outcomes and write an analysis directed toward the management team at Smart Company describing what the numbers mean and how they relate to the business. Submit journal entries in an Excel file and written segments in an MS Word document. For written answers, please make sure your responses are well-written, formatted per CSU-Global Guide to Writing and APA and have proper citations, where applicable.

Smart Company is preparing its financial statements for the year ended June 30, 2017. The financial statements are complete except for the statement of cash flows. You have been asked to prepare a statement of cash flows for the year ended June 30, 2017.

Download the excel spreadsheet found in the link below.

Required:

Prepare a spreadsheet to support a statement of cash flows for the year ended June 30, 2017.

In the tab named ‘Journal Entries’, show in journal entry form, the entries that would be made in preparation of the statement of cash flows.

Prepare Smart Company’s statement of cash flows for the year ended June 30, 2017. Prepare the statement of cash flows using the indirect method. Note: For full credit, you must prepare the statement of cash flow in good form with all necessary disclosures, including disclosures about noncash financing and investing activities.

You are the accountant for Smart Construction Company, a large construction company in Colorado. You have been presented with the following
financial information for Smart and asked to prepare the Statement of Cash Flows for the year ended June 30, 2017. You will complete all work for
the project in this excel file, which includes the following tabs:
1. Facts - Information taken from Smart's accounting records and additional information regarding the cash flows as of June 30, 2017.
2. Worksheet - Worksheet template (also see Example 21.3a in text).
3. Cash Flows - Statement of Cash Flows template (also see Example 21.3b in text). Account Balances June 30, 2016 June 30, 2017 Debits Cash $              361,700 $         880,550 Accounts Receivable                   100,000              125,000 Marketable Securities (at cost)                     11,700                13,000 Allowance for Change in Value                        1,500                   1,800 Construction in Process                   168,750              405,000 Prepaid Expenses                     45,000                10,000 Investments (long-term)                               -                  13,500 Leased Equipment                               -                  20,000 Building                     30,000                           -   Deferred tax asset                        5,375                   2,200 Land                     10,500                10,500 Discount on Bonds Payable                               -                     1,305 Totals                   734,525          1,482,855 Credits Allowance for doubtful accounts $                   6,000 $              4,500 Accounts Payable                     87,500              210,000 Deferred tax liability                        1,000                   3,300 Income Taxes Payable                        3,500                   9,000 Note Payable (long-term)                        3,500                           -   Accumulated Depreciation on Building                        2,500                           -   Accumulated Depreciation on Leased Asset                               -                     3,000 Lease obligation                               -                  18,000 Interest payable on lease obligation                               -                     1,800 Interest payable (Bonds)                               -                     1,800 Bonds payable                               -                  45,000 Billings on contruction in process                   150,000              325,000 Pension liability                   150,000              400,000 Convertible preferred stock, $100 par                        9,000                           -   Common Stock, $10 par                     14,000                24,500 Additional Paid-in Capital                        8,700                13,700 Unrealized Increase in Value of Marketable Securities                        1,500                   1,800 Retained Earnings                   297,325              421,455 Totals                   734,525          1,482,855 Additional information: a. Dividends declared and paid totaled $650. b. 300 shares of common stock (at par) were issued for cash. c. On July 1, 2016, convertible preferred stock that had originally been issued at par value were converted into 500 shares of common stock. The book value method was used to account for the conversion. d. The long-term note payable was paid by issuing 250 shares of common stock at the beginning of the fiscal year. e. Short-term marketable securities were purchased at a cost of $1,300. The portfolio was increased by $300 to a $14,800 fair value at year-end by adjusting the related allowance account. f. During the year, a 30% interest in Ricochet Co. was purchased as an investment for $9,500. Ricochet reported $20,000 in net income for the year and paid dividends of $2,000 to Smart. g. $5,000 of accounts receivable were written off as uncollectible during the year. h. Smart’s inventory consists of Construction-in-Process in excess of the Billings on Construction-in-Process account balance. i. A building was destroyed by fire during the year and insurance proceeds of $26,000 were collected. j. The 12% bonds payable were issued on February 28, 2017, at 97. They mature on February 28, 2027. The company uses the straight-line method to amortize bond premiums and discounts. k. Smart recorded pension expense of $350,000 for the year. l. A lease agreement was signed on July 1st, 2016 for the use of equipment worth $20,000. The company determined that the transaction should be recorded as a capital lease. SMART CONSTRUCTION COMPANY Cash Flows Worksheet For Year Ended June 30, 2017 Balances Change Worksheet Entries Account Titles 6/30/2016 6/30/2017 Increase (Decrease) Debit Credit Debits Cash        361,700           880,550                    518,850        518,850 Noncash Accounts: Accounts Receivable            100,000 125,000 25,000 Marketable Securities (at Cost)               11,700                   13,000 1300 Allowance for change in value                 1,500                     1,800 300 Construction in Process            168,750                405,000 236,250 Prepaid Expenses               45,000                   10,000 (35,000) Investment ( Long-Term)                   13,500 13,500 Leased Equipment                   20,000 20,000 Building               30,000 (30,000) Deferred tax Asset                 5,375                     2,200 (3,175) Land               10,500                   10,500 0 Discount on Bonds Payable                     1,305 1,305 Totals            734,525             1,482,855 1,408,330 Credits Allowance for doubtful accounts                 6,000                     4,500                               (1,500) Accounts Payable               84,500                210,000                             125,500 Deferred tax Liability                 1,000                     3,300                                  2,300 Income Taxes Payable                 3,500                     9,000                                  5,500 Note Payable (long-term)                 3,500                               (3,500) Accumulated Depreciation on Building                 2,500                               (2,500) Accumulated Depreciation on Leased Asset                     3,000                                  3,000 Lease obligation                   18,000                               18,000 Interest payable on lease obligation                     1,800                                  1,800 Interest payable (bonds)                     1,800                                  1,800 Bonds Payable                   45,000                               45,000 Billings on Contruction in process            150,000                325,000                             310,000 Pension liability            150,000                400,000                             250,000 Convertible preferred stock, $100 par                 9,000                               (9,000) Common Stck, $10 par               14,000                   24,500                               10,500 Additional Paid-in Capital                 8,700                   13,700                                  5,000 Unrealized increa in value of markerable securities                 1,500                     1,800                                     300 Retaining earnings            297,325                421,455                             124,130 Totals            734,525             1,482,855                         1,408,330 Cash Flows from Operating Activities: Cash Flows from Investing Activities: Cash Flows from Financing Activities Investing and Financing Activities Not Affecting Cash: Net Increase in Cash Totals Smart Construction Company Statement of Cash Flows For Year Ended June 30, 2017 Operating Activities:      Net Income      Adjustments for noncash income items:       Adjustments from cash flow effect from working capital items:       Net cash provided (used) by operating activities Investing activities:     Net cash provided (used) by investing activities Financing Activities:     Net cash provided (used) by financing activities Net increase in cash (see Schedule 1) Cash, June 30, 2016 Cash, June 30, 2017 Schedule 1: Investing and Financing Activities Not Affecting Cash

Answer 1

Solution

THE CASH FLOW USING INDIRECT METHOD
Particulars			Amount
The Cash flow from operating Activities'
The Profit for the year			124130
Adding NON Cash Items'
Add-Provision for Tax			10975
Add- Interest on lease			1800
Add -Interest payable on bonds			1800
Add- Loss on Discount on issue of bonds			1350
Add- Net Loss (30-26k) Building Destroyed			4000
Add Depreciation			3000
Less- allowance for Change in provision			-300
Less-Accumulated Dep on Building			-2500
Add - Provision for dividend			650
Pension Liability
Add - Charged to profit/loss			350000
Less - pension Liability Actually paid			-100000
Less - Profit of Richet Included			-6000
Add- Bills on Construction in Process			175000
Add- Increase in Accounts payable			122500
Less - Provision for DD for year			3500
Increase in the Value of Marketable Securities			300
Add- Decrease in Prepaid Exp			35000
Less- Increase in the Accounts Receivable			-30000
Net cash Flow from operating Activities			695205
Cash Flow from Investing Activities
Less- Building Destroyed			26000
Add- Lease equipment
Add- Investments made			-9500
Add- Construction in Process			-236250
Less- Increase in MS			-1300
Add- Dividends from Richet			2000
Net Cash flow from investing Activities			-219050
Cash Flow from Financing Activities
The common Stock			3000
The Cash Raised from issue of bonds			43650
Add - Lease Liability paid for the year			-2000
Decrease in the Note payable
Less- Discount on bonds payable			-1305
less-Dividend Paid			-650
Net Cash Flow from Financing Activities			42695
Net Cash flow -695205-219050+42695			518850
The Opening Cash Balance			361700
The Closing Cash Balance			880550