Question

Championship Boxing, Inc. is a small manufacturer of cardboard boxes of all sizes. You have reported for your first day of work, and the company is in an uproar. Yearly financial statements are being prepared, but a computer malfunction of the company’s new BOX-9000 computer has inadvertently erased parts of the company’s balance sheet, along with almost all related data except the company’s statement of cash flows. The IT department is working to retrieve earlier backups, but estimates that the reconstruction of the data will take about 24 hours.

Unfortunately, financial statements are to be presented at a stockholders’ meeting in one hour. The company uses the indirect method to prepare its statement of cash flows (rather than the direct method), so your new supervisor believes the missing data for the balance sheet can be prepared using the statement of cash flows. You are assigned this task, since you were top student in your business school class. Meanwhile, the supervisor will go to the stockholders’ meeting and give some introductory remarks.

In addition to the statement of cash flows, the following data survived the computer mishap:

A.	The investments were sold for $280,000 cash.
B.	Equipment was acquired for $151,920 cash.
C.	Land was acquired for $326,000 cash.
D.	There were no disposals of equipment during the year.
E.	12,500 shares of common stock were sold for cash during the year.
F.	There was a $96,000 debit to Retained Earnings for cash dividends declared.

Your supervisor has provided you with the following statement of cash flows, prepared using the indirect method. Recall that the statement of cash flows consists of three sections: cash flows from operating activities, cash flows from (used for) investing activities, and cash flows from (used for) financing activities. Review the statement, and then proceed to the next panel.

Championship Boxing, Inc.

Statement of Cash Flows

For the Year Ended December 31, 20Y8

1	Cash flows from operating activities:
2	Net income	$186,540.00
3	Adjustments to reconcile net income to net cash flow from operating activities:
4	Depreciation	18,400.00
5	Gain on sale of investments	(50,000.00)
6	Changes in current operating assets and liabilities:
7	Increase in accounts receivable	(25,370.00)
8	Increase in inventories	(33,550.00)
9	Increase in accounts payable	41,130.00
10	Decrease in accrued expenses payable	(12,470.00)
11	Net cash flow from operating activities		$124,680.00
12	Cash flows from (used for) investing activities:
13	Cash from sale of investments	$280,000.00
14	Cash used for purchase of land	(326,000.00)
15	Cash used for purchase of equipment	(151,920.00)
16	Net cash flow used for investing activities		(197,920.00)
17	Cash flows from (used for) financing activities:
18	Cash from sale of common stock	$187,500.00
19	Cash used for dividends	(91,200.00)
20	Net cash flow from financing activities		96,300.00
21	Increase (decrease) in cash		$23,060.00
22	Cash at the beginning of the year		585,920.00
23	Cash at the end of the year		$608,980.00

Using the information on previous panels, complete the following comparative balance sheet. Use a minus sign to indicate any negative amount.

Championship Boxing, Inc.

Comparative Balance Sheet

December 31, 20Y8 and 20Y7

1		Dec. 31, 20Y8	Dec. 31, 20Y7
2	Assets
3	Cash		$585,920.00
4	Accounts receivable (net)	230,950.00
5	Inventories		618,320.00
6	Investments	0.00
7	Land		0.00
8	Equipment	705,120.00
9	Accumulated depreciation-equipment	(166,400.00)
10	Total assets
11
12	Liabilities
13	Accounts payable (merchandise creditors)		$391,800.00
14	Accrued expenses payable (operating expenses)	41,150.00
15	Dividends payable		19,200.00
16	Total liabilities	$498,080.00
17
18	Stockholders’ Equity
19	Common stock ($4 par)		100,000.00
20	Paid-in capital in excess of par		280,000.00
21	Retained earnings	1,290,940.00
22	Total stockholders’ equity	$1,858,440.00
23	Total liabilities and stockholders’ equity

Answer 1

Championship Boxing Inc.
Balance Sheet
December 31, 2018 and 2017
	31-Dec-18	31-Dec-17
ASSETS
Current assets
Cash	6,08,980	5,85,920
Account Receivable	2,30,950	2,05,580
Inventories	6,51,870	6,18,320
Investments (b)	0	230000
Land	3,26,000	0
Equipment	7,05,120	5,53,200
Acc dep-Equipment	-1,66,400	-1,48,000
Total Assets	23,56,520	20,45,020
LIABILITIES AND EQUITY
Current liabilities
Accounts Payable	4,32,930	3,91,800
Accrued expense payable	41,150	53,620
Dividend payable (c )	24,000	19,200
Common Stock (a)	1,50,000	1,00,000
Additional paid in capital (a)	4,17,500	2,80,000
Retained earnings (d)	1290940	12,00,400
Total liabilities and stockholders equity	23,56,520	20,45,020

Working Note:

a.
Cash received for common stock	1,87,500
Common Stock sold (12,500*4)	50,000
Additional paid in capital	1,37,500
b.
Cash received from sale of investments	2,80,000
Gain on sale of investments	50,000
Investments value	2,30,000
c.
Opening dividend payable	19,200
Add: Dividend declared	96,000
Less: Dividend Paid	-91,200
Dividend payable	24,000
d.
Closing retained earnings	1290940
less: Net Profit	186540
Add: Dividend	96,000
Opening Retained earnings	12,00,400