Question

Question 3

Sunland Ltd., a private company reporting under ASPE, reported the following for the years ended May 31, 2017 and 2016.

SUNLAND LTD. Balance Sheet May 31
Assets		2017			2016
Cash		$24,800			$46,500
Accounts receivable		88,300			78,500
Inventory		183,000			159,500
Prepaid expenses		5,800			7,300
Land		134,500			79,000
Equipment		318,000			198,000
Accumulated depreciation		(76,200	)		(39,500	)
Total assets		$678,200			$529,300
Liabilities and Shareholders’ Equity
Accounts payable		$42,700			$39,500
Dividends payable		7,300			5,800
Income taxes payable		3,000			6,800
Mortgage payable		130,000			79,500
Common shares		218,000			165,500
Retained earnings		277,200			232,200
Total liabilities and shareholders’ equity		$678,200			$529,300

Additional Information:
1.		Profit for 2017 was $107,500.
2.		Common shares were issued for $52,500.
3.		Land with a cost of $52,500 was sold at a loss of $19,800.
4.		Purchased land with a cost of $108,000 with a $57,500 down payment and financed the remainder with a mortgage note payable.
5.		No equipment was sold during 2017.

Prepare a cash flow statement for the year 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).)

SUNLAND LTD. Cash Flow Statement - Indirect Method

Answer 1

Cash flow from operating activities
net income						107,500
adjustments to reconcile net income to
net cash from operating activities
Depreciation expense					36,700
loss on sale of land					19,800
increase in account receivable					-9800
increase in inventory					-23500
decrease in prepaid expense					1500
increase in accounts payable					3200
increase in dividends payable					1500
decrease in income taxes payable					-3800
						25,600
Net cash flow from operating activities						133,100
Cash flow from investing activities
Cash from sale of land					32700
cash used to purchase land					-57500
Cash used to purchase equipment					-120000
net cash used by investing activities						-144800
cash flow from financing activities
Cash from common stock issue					52,500
Cash dividend					-62500
net cash used by financing activities						-10,000
net increase in cash						-21,700
cash at the beginning of the year						46,500
cash at year end						24,800