In: Accounting
Union Brake Inc.’s comparative balance sheet information at December 31, 2017 and 2016, and its income statement for the year ended December 31, 2017, are as follows:
Union Brake Inc. | ||||||
Income Statement | ||||||
For Year Ended December 31, 2017 | ||||||
Sales | $ | 889,000 | ||||
Cost of goods sold | 566,000 | |||||
Gross profit | $ | 323,000 | ||||
Operating expenses | $ | 132,620 | ||||
Depreciation expense | 41,180 | 173,800 | ||||
Operating Profit | 149,200 | |||||
Loss on sale of equipment | 14,940 | |||||
Investment income | 21,520 | |||||
Profit before taxes | 155,780 | |||||
Income taxes | 22,000 | |||||
Profit | 133,780 | |||||
Union Brake Inc. | |||||||||
Balance Sheet Information | |||||||||
December 31 | |||||||||
2017 | 2016 | Net Change | |||||||
Cash | $ | 38,000 | $ | 22,960 | $ | 15,040 | |||
Cash equivalents | 27,280 | 7,600 | 19,680 | ||||||
Accounts receivable | 86,320 | 27,440 | 58,880 | ||||||
Inventory | 112,240 | 73,520 | 38,720 | ||||||
Investment | 0 | 27,280 | (27,280) | ||||||
Land | 74,800 | 74,800 | 0 | ||||||
Building and equipment | 403,580 | 425,100 | (21,520) | ||||||
Accumulated depreciation | 108,080 | 86,960 | 21,120 | ||||||
Accounts payable | 5,820 | 35,800 | (29,980) | ||||||
Dividends payable | 2,400 | 1,600 | 800 | ||||||
Bonds payable | 14,000 | 0 | 14,000 | ||||||
Preferred shares | 79,600 | 79,600 | 0 | ||||||
Common shares | 404,080 | 404,080 | 0 | ||||||
Retained earnings | 128,240 | 50,660 | 77,580 | ||||||
During 2017, the following transactions occurred:
1. Purchased equipment for $21,200 cash.
2. Sold the long-term investment on January 1, 2017 for $48,800,
resulting in investment income of 21,520.
3. Sold equipment for $7,720 cash that had originally cost $42,720
and had $20,060 of accumulated depreciation.
4. Issued $14,000 of bonds payable at face value.
Required:
1. How much cash was paid in dividends?
2. Prepare a statement of cash flows for Union Brake for the year ended December 31, 2017, using the indirect method. (List any deduction in cash and cash outflows as negative amounts.)
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Answer to Part 1:
Retained Earnings, Ending = Retained Earnings, Beginning + Net
Income – Dividend
$128,240 = $50,660 + $133,780 – Dividend
Dividend = $56,200
Answer to Part 2:
Accumulated Depreciation, Ending = Accumulated Depreciation,
Beginning + Depreciation – Depreciation on Equipment Sold
$108,080 = $86,960 + Depreciation - $20,060
Depreciation = $41,180