Question

QS 16-9 Computing financing cash flows LO P3

The following selected information is from Princeton Company’s comparative balance sheets.

At December 31	2017		2016
Common stock, $10 par value	$	115,000	$	112,000
Paid-in capital in excess of par		579,000		348,000
Retained earnings		325,500		299,500

  
The company’s net income for the year ended December 31, 2017, was $54,000.

1. Complete the T-accounts to calculate the cash received from the sale of its common stock during 2017.
  

Common Stock, $10 Par Beg. bal. End. bal. Paid-in Capital in Excess of Par Beg. bal. End. bal. Cash received 2. Complete the T-account to calculate the cash paid for dividends during 2017.    Retained Earnings Beg. bal. End. bal. A comparative balance sheet and income statement is shown for Cruz, Inc. CRUZ, INC. Comparative Balance Sheets December 31, 2017 2017 2016 Assets Cash $ 85,600 $ 21,300 Accounts receivable, net 36,800 45,200 Inventory 77,100 84,900 Prepaid expenses 4,700 3,900 Total current assets 204,200 155,300 Furniture 94,700 110,500 Accum. depreciation—Furniture (14,700 ) (8,400 ) Total assets $ 284,200 $ 257,400 Liabilities and Equity Accounts payable $ 13,400 $ 19,000 Wages payable 8,000 4,500 Income taxes payable 1,400 2,500 Total current liabilities 22,800 26,000 Notes payable (long-term) 28,900 66,400 Total liabilities 51,700 92,400 Equity Common stock, $5 par value 204,000 162,300 Retained earnings 28,500 2,700 Total liabilities and equity $ 284,200 $ 257,400     CRUZ, INC. Income Statement For Year Ended December 31, 2017 Sales $ 440,700 Cost of goods sold 283,700 Gross profit 157,000 Operating expenses Depreciation expense $ 33,900 Other expenses 80,400 114,300 Income before taxes 42,700 Income taxes expense 15,500 Net income $ 27,200 QS 16-13 Computing financing cash outflows LO P3 1. Assume that all common stock is issued for cash. What amount of cash dividends is paid during 2017? 2. Assume that no additional notes payable are issued in 2017. What cash amount is paid to reduce the notes payable balance in 2017? Retained Earnings Beg. bal. End. bal. Notes Payable Beg. bal. End. bal.

Answer 1

Solution 16-9:

Common Stock
Particulars	Debit	Particulars	Credit
To ending balance	$115,000.00	By Beginning balance	$112,000.00
		By Cash Received	$3,000.00
Total	$115,000.00	Total	$115,000.00

Paid-in capital in excess of par
Particulars	Debit	Particulars	Credit
To ending balance	$579,000.00	By Beginning balance	$348,000.00
		By Cash Received	$231,000.00
Total	$579,000.00	Total	$579,000.00

Cash received from issue of common stock = $3,000 + $231,000 = $234,000

Retained Earnings
Particulars	Debit	Particulars	Credit
To Dividend paid	$28,000.00	By Beginning balance	$299,500.00
To ending balance	$325,500.00	By Income Summary	$54,000.00
Total	$353,500.00	Total	$353,500.00

Cash paid for dividend = $28,000

Solution 16-13:

Retained Earnings
Particulars	Debit	Particulars	Credit
To Dividend paid	$1,400.00	By Beginning balance	$2,700.00
To ending balance	$28,500.00	By Income Summary	$27,200.00
Total	$29,900.00	Total	$29,900.00

Cash dividend paid during 2017 = $1,400

Notes Payable
Particulars	Debit	Particulars	Credit
To Cash	$37,500.00	By Beginning balance	$66,400.00
To ending balance	$28,900.00
Total	$66,400.00	Total	$66,400.00

Cash amount paid to reduce notes payable during 2017 = $37,500