Question

Jacobson Manufacturing Corporation earned $96,000 in profit during 2017. Machinery was sold for $126,000 and a $36,000 loss on the sale was recorded. Machinery purchases totalled $395,000 including a July purchase for which an $148,000 promissory note was issued. Bonds were retired at their face value, and the issuance of new common shares produced an infusion of cash. Jacobson’s comparative balance sheets were as follows:

Jacobson Corporation
Comparative Balance Sheet Information
(in thousands)
	December 31
Assets	2017			2016
Cash	$	189		$	135
Accounts receivable		281			358
Merchandise inventory		460			395
Machinery		2,200			2,110
Accumulated depreciation		(360)			(380)
Total assets	$	2,770		$	2,618
Liabilities and Equity
Accounts payable	$	715		$	813
Notes payable		408			295
Dividends payable		66			54
Bonds payable		262			371
Common shares		920			730
Retained earnings		399			355
Total liabilities and equity	$	2,770		$	2,618

Required: (Enter amounts in thousands, as per balance sheet above. List any deduction in cash and cash outflows and loss as negative amounts.)
1. What was Jacobson’s depreciation expense in 2017?

2. What was the amount of cash flow from operating activities?



3. What was the amount of cash flow from investing activities?



4. What was the amount of dividends declared? paid?

5. By what amount would you expect the total inflows of cash to differ from the total outflows of cash?



6. What was the amount of cash flow from financing activities?

Answer 1

Solution (1):

Jacobson’s depreciation expense in 2017 is $ 123. Calculation is given below.

Machinery

Particulars	Debit Amount in 000’s ($)	Particulars	Credit Amount in 000’s ($)
Beginning Balance	2,110	Cash Sale	126
Machinery Purchased: Notes: 148 Cash: 247	395	Loss on sale of machinery	36
		Accumulated Depreciation on machinery sold (Balancing Figure)	143
		Ending Balance	2,200
Total	2,505	Total	2,505

Accumulated Depreciation

Particulars	Debit Amount in 000’s ($)	Particulars	Credit Amount in 000’s ($)
		Beginning Balance	380
Machinery Account (Accumulated Depreciation on furniture sold) (Transferred from Machinery account)	143	Income Statement (Depreciation expense- 2017) (Balancing figure)	123
Ending Balance	360
Total	503	Total	503

Solution (2):

The amount of cash flow from operating activities $ 294.

Particulars	Amount in thousands ($)	Amount in thousands ($)
CASH FLOW FROM OPERATING ACTIVITIES
Net Income		96
Adjustments to reconcile net income to operating cash flow
Income statement items not affecting cash
Add: Depreciation expense	123
Add: Loss in sale of machinery	36
Changes in current operating assets and liabilities
Add: Decrease in Accounts Receivable ($ 358 - $ 281)	77
Less: Increase in Merchandise Inventory ($ 460 - $ 395)	(65)
Add: Increase in Notes Payable ($ 408 - $ 295)	113
Add: Increase in Dividends Payable ($ 66 - $ 54)	12
Less: Decrease in Accounts Payable ($ 813 - $ 715)	(98)	198
Net Cash provided by operating activities		294

Solution (3):

The amount of cash used in investing activities is ($ 121).

Particulars	Amount in thousands ($)	Amount in thousands ($)
CASH FLOW FROM INVESTING ACTIVITIES
Machine Purchased for cash (Refer solution 1)	(247)
Machine Sold for cash (Given)	126
Net Cash used in investing activities		(121)

Solution (4):

The amount of dividend declared is $ 64

The amount of dividend paid is $ 52

Retained Earnings

Particulars	Debit Amount in 000’s ($)	Particulars	Credit Amount in 000’s ($)
Dividend paid (Balancing Figure)	52	Beginning Balance	355
		Net Income (2017)	96
Ending Balance	399
Total	451	Total	451

Dividend Payable

Particulars	Debit Amount in 000’s ($)	Particulars	Credit Amount in 000’s ($)
Dividend paid (Transferred from retained earning account)	52	Beginning Balance	54
Ending Balance	66	Dividend declared- 2017 (Balancing figure)	64
Total	118	Total	118

Solution (5):

The amount of total inflows of cash

= Decrease in Accounts Receivable + Increase in Notes Payable+ Increase in Dividends Payable+ Machine Sold for cash (Given) + Issue of common shares

= $ 77+$ 113 + $ 12 +$ 126 + 190

= $ 518

The amount of total outflows of cash

= Increase in Merchandise Inventory + Decrease in Accounts Payable + Machine Purchased for cash+ Retirement of bonds+ Dividend paid

=$ 65 + $ 98 + $ 247 + $ 109 + $ 52

=$ 571

The amount expected the total inflows of cash to differ from the total outflows of cash is

= $ 571 - $ 518

= $ 53

Solution (6):

The amount of cash flow from financing activities is $ 29.

Particulars	Amount in thousands ($)	Amount in thousands ($)
CASH FLOW FROM FINANCING ACTIVITIES
Issue of common shares ($ 920 -$ 730)	190
Retirement of bonds ($ 371 - $ 262)	(109)
Dividend paid (Refer solution 4)	(52)
Net Cash provided by financing activities		29