In: Accounting
Back Cove Company has the following comparative balance sheets and income statement:
2017 2016
Cash
$10,000
$15,000
Receivables
11,000
10,000
Inventories
22,000
18,000
Other Assets
(net)
20,000
30,000
$63,000
$73,000
Accounts
Payable
$10,000
$20,000
Capital
Stock
$20,000
16,000
Retained
Earnings
33,000
37,000
$63,000
$73,000
Sales
$110,000
Cost of
Sales
72,000
Gain on sale of
Assets
2,000
Expenses
16,000
Income
$ 24,000
Depreciation expense was $5,000 (included in the $16,000). A machine with a cost of $19,000 and book value of $13,000 was sold which produced the gain on sale of assets. Other assets were purchased for cash during the year, a dividend paid, and stock was issued for $4,000.
A. Using the Indirect Method, prepare a cash flow statement.
B. Refer to Back Cove in Problem 3. Assuming all operating expenses are paid for in cash and all inventory purchases are made on account, prepare cash from operations using the Direct Method.
(A) Cash flow Statement
Cash flow from operating activities ( In $)
Profit/ Loss earned during the year (37000-33000) ( 4000)
Add: Depreciation 5000
Less: Gain on sale of assets (2000)
Adjusted profits/ Losses before depreciation and Non-operating items (1000)
Add: Decrease in the value of other assets 10000
Less: Increase in receivables (1000)
Less: Increase in inventories (4000)
Less: Decrease in Account payable (10000)
Cash used in operating activit (6000)
Cash from investing activities
Sale of asset 15000
Less: Purchase of assets (8000)
Net Cash flow frominvesting activities 7000
Cash flow from financing activity
Issue of stock 4000
Net cash flow from financing activity 4000
Note: there is pehaps missing info about dividend paid
(b) Cash from operations ( direct method)
cash reciverd from debtors: 10000
Less: cah paid to debtors: (10000)
Less: Operating expenses:(11000)
cash used in operations : (11000)