Question

Complete the following questions. In addition to answering the items below, you must submit an analysis of the assignment. Analyze the specific outcomes and write an analysis directed toward the management team at Smart Company describing what the numbers mean and how they relate to the business. Submit journal entries in an Excel file and written segments in an MS Word document. For written answers, please make sure your responses are well-written, formatted per CSU-Global Guide to Writing and APA and have proper citations, where applicable. Smart Company is preparing its financial statements for the year ended June 30, 2017. The financial statements are complete except for the statement of cash flows. You have been asked to prepare a statement of cash flows for the year ended June 30, 2017. Download the excel spreadsheet found in the link below. Required: Prepare a spreadsheet to support a statement of cash flows for the year ended June 30, 2017. In the tab named ‘Journal Entries’, show in journal entry form, the entries that would be made in preparation of the statement of cash flows. Prepare Smart Company’s statement of cash flows for the year ended June 30, 2017. Prepare the statement of cash flows using the indirect method. Note: For full credit, you must prepare the statement of cash flow in good form with all necessary disclosures, including disclosures about noncash financing and investing activities.

					Account Balances
					June 30, 2016	June 30, 2017
Debits
Cash					$       361,700	$       880,550
Accounts Receivable					100,000	125,000
Marketable Securities (at cost)					11,700	13,000
Allowance for Change in Value					1,500	1,800
Construction in Process					168,750	405,000
Prepaid Expenses					45,000	10,000
Investments (long-term)					-	13,500
Leased Equipment					-	20,000
Building					30,000	-
Deferred tax asset					5,375	2,200
Land					10,500	10,500
Discount on Bonds Payable					-	1,305
Totals					734,525	1,482,855
Credits
Allowance for doubtful accounts					$           6,000	$           4,500
Accounts Payable					87,500	210,000
Deferred tax liability					1,000	3,300
Income Taxes Payable					3,500	9,000
Note Payable (long-term)					3,500	-
Accumulated Depreciation on Building					2,500	-
Accumulated Depreciation on Leased Asset					-	3,000
Lease obligation					-	18,000
Interest payable on lease obligation					-	1,800
Interest payable (Bonds)					-	1,800
Bonds payable					-	45,000
Billings on contruction in process					150,000	325,000
Pension liability					150,000	400,000
Convertible preferred stock, $100 par					9,000	-
Common Stock, $10 par					14,000	24,500
Additional Paid-in Capital					8,700	13,700
Unrealized Increase in Value of Marketable Securities					1,500	1,800
Retained Earnings					297,325	421,455
Totals					734,525	1,482,855
Additional information:
a. Dividends declared and paid totaled $650.
b. 300 shares of common stock (at par) were issued for cash.
c. On July 1, 2016, convertible preferred stock that had originally been issued at par value were
converted into 500 shares of common stock. The book value method was used to account for the
conversion.
d. The long-term note payable was paid by issuing 250 shares of common stock at the beginning of the
fiscal year.
e. Short-term marketable securities were purchased at a cost of $1,300. The portfolio was increased by
$300 to a $14,800 fair value at year-end by adjusting the related allowance account.
f. During the year, a 30% interest in Ricochet Co. was purchased as an investment for $9,500. Ricochet
reported $20,000 in net income for the year and paid dividends of $2,000 to Smart.
g. $5,000 of accounts receivable were written off as uncollectible during the year.
h. Smart’s inventory consists of Construction-in-Process in excess of the Billings on
Construction-in-Process account balance.
i. A building was destroyed by fire during the year and insurance proceeds of $26,000 were collected.
j. The 12% bonds payable were issued on February 28, 2017, at 97. They mature on February 28, 2027.
The company uses the straight-line method to amortize bond premiums and discounts.
k. Smart recorded pension expense of $350,000 for the year.
l. A lease agreement was signed on July 1st, 2016 for the use of equipment worth $20,000. The
company determined that the transaction should be recorded as a capital lease.

Answer 1

CASH FLOW USING INDIRECT METHOD
Particulars
Cash flow from operating Activities'
Profit for the year			124130
Adding NON Cash Items'
Add-Provision for Tax			10975
Add- Interest on lease			1800
Add -Interest payable on bonds			1800
Add- Loss on Discount on issue of bonds			1350
Add- Net Loss (30-26k) Building Destroyed			4000
Add Depreciation			3000
Less- allowance for Change in provision			-300
Less-Accumulated Dep on Building			-2500
Add - Provision for dividend			650
Pension Liability
Add - Charged to P/L			350000
Less - pension Liabilty Actually paid			-100000
Less - Profit of Ruchet Included			-6000
Add- Bills on Construction in Process			175000
Add- Increase in Accounts payable			122500
Less - Provision for DD for the year			3500
Increase in Value of Marketable Securities			300
Add- Decrease in Prepaid Exp			35000
Less- Increase in Accounts Receivable			-30000
Net cash Flow from operating Activities			695205
Cash Flow from Investing Activities
Less- Building Destroyed			26000
Add- Lease eqipment
Add- Investments made			-9500
Add- Construction in Process			-236250
Less- Increase in MS			-1300
Add- Dividends from Ruchet			2000
Net Cash flow from investing Activities			-219050
Cash Flow from Financing Activities
common Stock			3000
Cash Raised from issue of bonds			43650
Add - Lease Liability paid for the year			-2000
Decrease in Note payable
Less- Discount on bonds payable			-1305
less-Dividend Paid			-650
Net Cash Flow from Financing Activities			42695
Net Cash flow -695205-219050+42695			518850
Opening Cash Balance			361700
Closing Cash BaLance			880550