Question

The income statement, balance sheets, and additional information for Video Phones, Inc., are provided.   

VIDEO PHONES, INC. Income Statement For the Year Ended December 31, 2018
Net sales		$	2,886,000
Expenses:
Cost of goods sold	$ 1,800,000
Operating expenses	828,000
Depreciation expense	24,000
Loss on sale of land	7,700
Interest expense	13,500
Income tax expense	45,000
Total expenses			2,718,200
Net income		$	167,800

  

VIDEO PHONES, INC. Balance Sheet December 31
	2018		2017
Assets
Current assets:
Cash	$	196,620	$	119,460
Accounts receivable		77,700		57,000
Inventory		105,000		132,000
Prepaid rent		10,080		5,040
Long-term assets:
Investments		102,000		0
Land		207,000		234,000
Equipment		264,000		207,000
Accumulated depreciation		(65,400)		(41,400)
Total assets	$	897,000	$	713,100
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	63,300	$	78,000
Interest payable		5,700		9,400
Income tax payable		14,700		13,700
Long-term liabilities:
Notes payable		279,000		222,000
Stockholders' equity:
Common stock		270,000		270,000
Retained earnings		264,300		120,000
Total liabilities and stockholders’ equity	$	897,000	$	713,100

  

Additional Information for 2018:

1. Purchase investment in bonds for $102,000.
2. Sell land costing $27,000 for only $19,300, resulting in a $7,700 loss on sale of land.
3. Purchase $57,000 in equipment by borrowing $57,000 with a note payable due in three years. No cash is exchanged in the transaction.
4. Declare and pay a cash dividend of $23,500.

  
Required:

Prepare the statement of cash flows using the indirect method. Disclose any noncash transactions in an accompanying note. (List cash outflows and any decrease in cash as negative amounts.)

Answer 1