Question

The income statement, balance sheets, and additional information for Video Phones, Inc., are provided.   

VIDEO PHONES, INC. Income Statement For the Year Ended December 31, 2018
Net sales		$	2,816,000
Expenses:
Cost of goods sold	$ 1,750,000
Operating expenses	818,000
Depreciation expense	23,000
Loss on sale of land	7,600
Interest expense	13,000
Income tax expense	44,000
Total expenses			2,655,600
Net income		$	160,400

  

VIDEO PHONES, INC. Balance Sheet December 31
	2018		2017
Assets
Current assets:
Cash	$	179,760	$	111,080
Accounts receivable		76,600		56,000
Inventory		105,000		131,000
Prepaid rent		9,840		4,920
Long-term assets:
Investments		101,000		0
Land		206,000		232,000
Equipment		262,000		206,000
Accumulated depreciation		(64,200)		(41,200)
Total assets	$	876,000	$	699,800
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	62,400	$	77,000
Interest payable		5,600		9,200
Income tax payable		14,600		13,600
Long-term liabilities:
Notes payable		277,000		221,000
Stockholders' equity:
Common stock		260,000		260,000
Retained earnings		256,400		119,000
Total liabilities and stockholders’ equity	$	876,000	$	699,800

  

Additional Information for 2018:

1. Purchase investment in bonds for $101,000.
2. Sell land costing $26,000 for only $18,400, resulting in a $7,600 loss on sale of land.
3. Purchase $56,000 in equipment by borrowing $56,000 with a note payable due in three years. No cash is exchanged in the transaction.
4. Declare and pay a cash dividend of $23,000.

  
Required:

Prepare the statement of cash flows using the indirect method. Disclose any noncash transactions in an accompanying note. (List cash outflows and any decrease in cash as negative amounts.)

VIDEO PHONES, INC. Statement of Cash Flows For the Year Ended December 31, 2018 Cash Flows from Operating Activities: Adjustments to reconcile net income to net cash flows from operating activities: Net cash flows from operating activities $0 Cash Flows from Investing Activities: Net cash flows from investing activities 0 Cash Flows from Financing Activities: Net cash flows from financing activities 0 Cash at the beginning of the period Cash at the end of the period $0 Note: Noncash Activities

Answer 1

	Statement of Cash Flows
	For the Year Ended December 31, 2018
Cash Flows from Operating Activities:
Net income		160400
Adjustments to reconcile net income to
Net cash provided by operating activities
Depreciation expense	23000
Loss on sale of land	7600
Increase in accounts receivables	-20600
Decrease in inventory	26000
Increase in Prepaid rent	-4920
Decrease in accounts payable	-14600
Decrease in Interest payable	-3600
Increase in Income tax payable	1000
		13880
Net cash provided by operating activities		174280
Cash Flows from Investing Activities:
Purchase of investment in bonds	-101000
Sale of Land	18400
Net Cash Provided by Investing Activities		-82600
Cash Flows from Financing Activities
Payment of Cash Dividends	-23000
Net Cash Used by Financing Activities		-23000
Net Increase in Cash		68680
Cash at Beginning of Period		111080
Cash at End of Period		179760
Note: Noncash Activities
Purchased Equipment by Issuance of Notes payable		56000