Question

During calendar-year 2019, The Hammond Corporation had the following information in its accounting records: Paid cash dividends of $42,000. Issued common stock for $30,000 in cash. Cash balance, December 31, 2019 - $________. Acquired land costing $80,000, in exchange for a long-term note payable. A building with an adjusted cost basis of $42,000 was destroyed by fire. Increase in the inventory account during the year - $5,000. Depreciation expense for the year was $28,000. Amortization expense for a trademark was $1,000. A 2016 investment in bonds, originally purchased for $33,000, was sold for $38,000. Hammond’s earnings for the year from an equity-method investee was $6,000. Issued preferred stock for $50,000 in cash. Increase in net accountants receivable account during the year - $9,000. Decrease in accounts payable account during the year - $20,000. Retired debentures payable at their face value for $130,000 in cash. Increase in the deferred income tax liability balance during the year - $3,000. Cash balance, January 1, 2019 - $55,000. Net sales for the year were $320,000. Net income for the year was $22,000. Using the information above, prepare a statement of cash flows (indirect method) for The Hammond Corporation, for the year ended December 31, 2019.

Answer 1

Hammond Corporation
Statement of Cash Flows
Year Ended December 31,2019
Cash Flows from Operating Activities:
Net income		$22,000
Adjustments to Reconcile Net income to Net Cash
Provided by (Used for) Operating activities:
Loss of building due to fire	$42,000
Depreciation Expense	$28,000
Amortization expense	$1,000
Equity income	($6,000)
Gain on sale of bonds	($5,000)
Increase in accounts receivable	($9,000)
Increase in inventory	($5,000)
Decrease in accounts payable	($20,000)
Increase in deferred tax liability	$3,000	$29,000
Net cash flows from operating activities (i)		$51,000
Cash Flows from investing activities:
Cash received from sale of bonds	$38,000
Net cash flows from investing activities (ii)		$38,000
Cash Flows from financing activities:
Cash received from Issuance of common stock	$30,000
Cash received from Issuance of preferred stock	$50,000
Cash paid for Retirement of debentures	($130,000)
Cash paid for dividends	($42,000)
Net cash flows from financing activities (iii)		($92,000)
Net increase (decrease) in cash (i+ii+iii)		($3,000)
Cash balance at Jan 1,2019		$55,000
Cash balance at Dec 31,2018		$52,000
Non-Cash items:
Acquisition of land in exchange of long-term notes payable		$80,000