Question

The comparative statements of financial position of Mikos Inc. as at December 31, 2017 and 2018, and its statement of earnings for the year ended December 31, 2018, are presented below: MIKOS INC. Comparative Statements of Financial Position December 31 2018 2017 Assets Cash $ 10,500 $ 18,500 Short-term investments 70,500 39,500 Accounts receivable 75,500 32,000 Inventories, at cost 57,000 41,500 Prepaid expenses 5,500 9,000 Land 51,000 77,500 Property, plant, and equipment, net 286,000 186,500 Intangible assets 25,500 31,000 $ 581,500 $ 435,500 Liabilities and Shareholders’ Equity Accounts payable $ 18,500 $ 43,000 Income tax payable 9,000 2,500 Accrued liabilities 11,500 -0- Long-term notes payable 125,000 180,000 Contributed capital 230,000 67,500 Retained earnings 187,500 142,500 $ 581,500 $ 435,500 MIKOS INC. Statement of Earnings For the Year Ended December 31, 2018 Sales $ 895,000 Cost of sales $ 445,000 Amortization expense—intangible assets 5,500 Depreciation expense—property, plant, and equipment 34,500 Operating expenses 236,000 Interest expense 13,500 734,500 Earnings before income taxes 160,500 Income tax expense 48,150 Net earnings $ 112,350 Additional information is as follows: a. Land was sold for cash at its carrying amount. b. The short-term investments will mature in February 2019. c. Cash dividends were declared and paid in 2018. d. New equipment with a cost of $167,500 was purchased for cash, and old equipment was sold at its carrying amount. e. Long-term notes of $17,500 were paid in cash, and notes of $37,500 were converted to shares. Required: 1. Prepare a statement of cash flows for Mikos Inc. for the year ended December 31, 2018 by using the indirect method. (Negative answers should be indicated by a minus sign.)

Answer 1

Ans. Cash flow statement of Mikos Inc for the year ended Dec 2018

Indirect Method

Cashflow from Operating Activities                                                 $

Net Profit                                                                                          112350

Add: Amoritisation exp.                                                                     5500

         Depreciation exp.                                                                   34500

Adjustment of Current assets

Increase of Receivable                                                                  (43500)

Increase of Inventories                                                                   (15500)

Decrease of Prepaid exp.                                                                 3500

Decrease of account payable                                                        (24500)

Increase of IncomeTax payable                                                       6500

Increase of Accured Liabilities paid                                             11500

Cash flow from Operating activies   (A)                                        90350

Cash flow from Investing Activities

Purchasing of Investment (70500-39500)                                  (31000)

Sale of Equipment *                                                                         33500

Purchase of new equipment                                                         (167500)

Sale of land                                                                                        26500

cash flow from Investing activities (B)                                         (138500)

Cash flow from Financing activities

Dividend payment (142500+112350-187500)                          (67350)

Payment of long term debt                                                            (17500)

Issued of share capital (67500+37500-230000)    125000

Cash flow from financial activities (C)    40150

Net cash flow for the year   (A+B+C)    (8000)

cash balance at opening                                                                 18500

Closing cash balance at the end of 2018    10500            

*Calculation of value of new equipment purchase

Closing Balance of equipment    = 286000

Add: Depreciation charge during the yr    = 34500

Sale of equipment (difference amt)              =     33500

                                                                                    354000

           opening balance =    186500

   Purchase during the yr                        =    167500

Total                                                                   =     354000