Question

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Splish Brothers Inc. reported the following information for 2017.

Splish Brothers Inc.

Comparative Balance Sheets

December 31

Assets 2017 2016

Change

Increase/Decrease

Cash $55,490 $35,760 $19,730 Increase

Accounts receivable 61,640 21,790 39,850 Increase

Inventory 43,890 –0–

43,890 Increase

Prepaid expenses 6,050 3,970 2,080 Increase

Land 54,910 69,520 14,610 Decrease

Buildings 198,520 198,520 –0–

Accumulated depreciation—buildings (20,880 ) (13,920 ) 6,960 Increase

Equipment 182,980 67,590 115,390 Increase

Accumulated depreciation—equipment (28,090 ) (9,910 ) 18,180 Increase

Totals $554,510 $373,320

Liabilities and Stockholders’ Equity

Accounts payable $43,400 $40,240 $3,160 Increase

Accrued expenses payable 0 10,020 10,020 Decrease

Bonds payable 99,900 149,610 49,710 Decrease

Common stock ($1 par) 229,050 59,500 169,550 Increase

Retained earnings 182,160 113,950 68,210 Increase

Totals $554,510 $373,320

Splish Brothers Inc.

Income Statement

For the Year Ended December 31, 2017

Sales revenue

$936,810

Cost of goods sold

$473,060

Operating expenses

231,970

Interest expense

12,060

Loss on disposal of equipment

1,980 719,070

Income before income taxes

217,740

Income tax expense

65,040

Net income

$152,700

Additional information:

1. Operating expenses include depreciation expense of $39,940.

2. Land was sold at its book value for cash.

3. Cash dividends of $84,490 were declared and paid in 2017.

4. Equipment with a cost of $166,010 was purchased for cash. Equipment with a cost of $50,620 and a book value of $35,820 was sold for $33,840 cash.

5. Bonds of $49,710 were redeemed at their face value for cash.

6. Common stock ($1 par) of $169,550 was issued for cash.

Use this information to prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Splish Brothers Inc.

Statement of Cash Flows—Indirect Method

$

Adjustments to reconcile net income to

$

$

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Answer 1

Statement of cash flow
Cash flows from operating activities
Net income		152700
Adjustment to reconcile net income
Depreciation expenses	39940
Loss on disposal of equipment	1980
Increase in Accounts Receivable	-39850
Increase in Inventory	-43890
Increase in Prepaid Expenses	-2080
Increase in Accounts payable	3160
Decrease in Accrued expenses payable	-10020
		-50760
Net cash from operating activities		101940
Cash flows from investing activities
Purchase of equipment	-166010
Sale of land	14610
Sale of equipment	33840
		-117560
Net cash used investing activities		(117,560.00)
Cash flows from financing activities
Issue of common stock	169,550.00
Payment of Cash Dividend	-84490
Repayment of Bonds payable	-49710
		35,350.00
Net cash used financing activities		35,350.00
Net Increase in cash and cash equivalents		19,730.00
Cash and cash equivalents at beginning of period		35,760.00
Ending Balance		55,490.00
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