In: Accounting
Quiz #10
Husky Company’s 2016 income statement and comparative balance sheets as of December 31 of 2016 and 2015 are shown below:
HUSKY COMPANY
Income Statement
For Year Ended December 31, 2016
Sales revenue…………………………………………………... $1,270,000
Cost of goods sold……………………………………………... $860,000
Wages expense………………………………………………… 172,000
Insurance expense…………………………………………….. 16,000
Depreciation expense………………………………………….. 34,000
Interest expense……………………………………………….. 18,000
Income tax expense…………………………………………… 58,000 1,158,000
Net income…………………………………………………….. $ 112,000
HUSKY COMPANY
Balance Sheets
Dec. 31, 2016 Dec. 31, 2015
Assets
Cash…………………………………………………………….. $ 22,000 $ 10,000
Accounts receivable……………………………………………. 82,000 64,000
Inventory……………………………………………………….. 180,000 120,000
Prepaid insurance……………………………………………..... 10,000 14,000
Plant assets…………………………………………………….. 500,000 390,000
Accumulated depreciation……………………………………... (136,000) (102,000)
Total assets……………………………………………………... $658,000 $496,000
Liabilities and Stockholders’ Equity
Accounts payable………………………………………………. $ 14,000 $ 20,000
Wages payable…………………………………………………. 18,000 12,000
Income tax payable…………………………………………….. 14,000 16,000
Bonds payable…………………………………………………. 260,000 150,000
Common stock…………………………………………………. 180,000 180,000
Retained earnings………………………………………………. 172,000 118,000
Total liabilities and stockholders’ equity………………………. $658,000 $496,000
Cash dividends of $58,000 were declared and paid during 2016. Plant assets were purchased for cash. Bonds were issued for cash. Bond interest is paid semiannually on June 30 and December 31. Accounts payable relate to merchandise purchases.
Required
Prepare the operating section of cash flow using the indirect method. Interest expense or income is always operating.
Quiz #11
Using Quiz # 10 above - prepare the entire cash flow statement (operating, investing, and financing) using the indirect method
Operating section of cash flow - indirect method
Since the net profit or loss reported on the cash flow statement already accounts for the interest expenses paid during a given period, the amount paid will not appear as a separate line item on the cash flow statement
cash flow from operating activities: | ||
net income | 112000 | |
adjustments to reconcile to net income | ||
depreciation | 34000 | |
increase in accounts receivable | -18000 | |
increase in inventory | -60000 | |
decrease in prepaid assets | 4000 | |
decrease in accounts payable | -6000 | |
increase in wages payable | 6000 | |
decrease in income tax payable | -2000 | |
net cash flow from operating activities | 70000 |
Husky Company | ||
Cash flow statement - indirect method | ||
For the period Dec.31, 2016 (amounts in $) | ||
cash flow from operating activities: | ||
net income | 112000 | |
adjustments to reconcile to net income | ||
depreciation | 34000 | |
increase in accounts receivable | -18000 | |
increase in inventory | -60000 | |
decrease in prepaid assets | 4000 | |
decrease in accounts payable | -6000 | |
increase in wages payable | 6000 | |
decrease in income tax payable | -2000 | |
net cash flow from operating activities | 70000 | |
cash flow from investing activities: | ||
purchase of plant assets | -110000 | |
net cash flow from investing activities | -110000 | |
cash flow from financing activities: | ||
issuance of bonds | 110000 | |
dividends payable | -58000 | |
net cash flow from financing activities | 52000 | |
net change in cash flow | 12000 | |
cash balance at the beginning | 10000 | |
cash balance at the end | 22000 |