Question

ALL THE INFORMATION I HAVE IS STATED BELOW!

1.Statement of Cash Flows.

Assets	31/12/2017	31/12/2016
Cash	$81,000	$54,000
Accounts receivable, net	$79,500	$85,500
Inventory	$241,500	$184,500
Land	$270,000	$427,500
Building	$450,000	$450,000
Accumulated depreciation—building	($112,500)	($90,000)
Equipment	$2,347,500	$1,350,000
Accumulated depreciation—equipment	($265,500)	($211,500)
Total of Assets	$3,091,500	$2,250,000
Liabilities & Equity
Accounts payable	$303,000	$225,000
Bonds payable	$675,000	$0
Capital stock, $10 par	$1,875,000	$1,875,000
Retained earnings	$238,500	$150,000
Total of Liabilities & Equity	$3,091,500	$2,250,000

Additional Data:

1. Net income for the year amounted to $163,500.

2. Cash dividends were paid amounting to 4% of par value.

3. Land was sold for $180,000.

4. Sharp sold equipment, which cost $337,500 and had accumulated depreciation of $135,000, for $172,500.

Instructions

Prepare a statement of cash flows using the indirect method

Answer 1

Loss on Sale of Equipment = Cost of Equipment - Depreciation on Equipment sold - Proceed from Sale of Equipment
Loss on Sale of Equipment = $337,500 - $135,000 - $172,500
Loss on Sale of Equipment = $30,000

Depreciation Expense, Equipment = Accumulated Depreciation, ending balance + Depreciation on equipment sold - Accumulated Depreciation, beginning
Depreciation Expense, Equipment = $265,500 + $135,000 - $211,500
Depreciation Expense, Equipment = $189,000

Depreciation Expense, Building = Accumulated Depreciation, ending balance - Accumulated Depreciation, beginning
Depreciation Expense, Building = $112,500 - $90,000
Depreciation Expense, Building = $22,500

Purchase of Equipment = Ending Equipment + Cost of Equipment sold - Beginning Equipment
Purchase of Equipment = $2,347,500 + $337,500 - $1,350,000
Purchase of Equipment = $1,335,000

Gain on Sale of Land = Proceed from Sale of Land - Cost of Land
Gain on Sale of Land = $180,000 - $157,500
Gain on Sale of Land = $22,500