Question

Following is a partially completed balance sheet for Hoeman Inc. at December 31, 2020, together with comparative data for the year ended December 31, 2019. From the statement of cash flows for the year ended December 31, 2020, you determine the following:

• Net income for the year ended December 31, 2020, was $96,500.
• Dividends paid during the year ended December 31, 2020, were $66,000.
• Accounts receivable decreased $12,500 during the year ended December 31, 2020.
• The cost of new buildings acquired during 2020 was $129,000.
• No buildings were disposed of during 2020.
• The land account was not affected by any transactions during the year, but the fair value of the land at December 31, 2020, was $191,000.

Required:

1. Complete the December 31, 2020, balance sheet. (Hint: Long-term debt is the last number to compute to make the balance sheet balance.)
2. Prepare a statement of cash flows for the year ended December 31, 2020, using the indirect method.

Prepare a statement of cash flows for the year ended December 31, 2020, using the indirect method. (Amounts to be deducted should be indicated by a minus sign.)

Complete the December 31, 2020, balance sheet. (Hint: Long-term debt is the last number to compute to make the balance sheet balance.)

HOEMAN INC. Comparative Balance Sheets At December 31, 2020 and 2019 2020 2019 Assets: Current assets: Cash $56,000 $48,500 Accounts receivable 126,500 139,000 Inventory 157,000 176,500 Total current assets $339,500 $364,000 Land 143,500 143,500 Buildings 400,500 271,500 Less: Accumulated depreciation (120,500) (105,500) Total land & buildings $423,500 $309,500 Total assets $763,000 $673,500 Liabilities: Current liabilities: Accounts payable $169,000 $189,500 Note payable 157,500 127,000 Total current liabilities $326,500 $316,500 Long-term debt $171,000 $127,000 Stockholders' Equity: Common stock $52,000 $47,000 Retained earnings 213,500 183,000 Total stockholders' equity $265,500 $230,000 Total liabilities and stockholders' equity $763,000 $673,500

HOEMAN INC. Statement of Cash Flows For the Year Ended December 31, 2020 Cash flows from operating activities: Net income $96,500 Add (deduct) items not affecting cash: Depreciation expense Decrease in accounts receivable Decrease in inventory Increase in note payable Decrease in accounts payable Net cash provided by operating activities $96,500 Cash flows from investing activities: Cash paid to acquire new buildings Net cash used for investing activities $0 Cash flows from financing activities: Cash received from issuance of long-term debt Cash received from issuance of common stock Payment of cash dividends on common stock Net cash used by financing activities $0 Net increase in cash for the year $96,500 Cash balance, January 1, 2020 Cash balance, December 31, 2020 $96,500

Answer 1

HOEMAN INC.
Statement of Cash Flows
For the Year Ended December 31, 2020
Cash flows from operating activities:
Net income	96500
Add (deduct) items not affecting cash:
Depreciation expense ($120500 - $105500)	15000
Decrease in accounts receivable	12500
Decrease in inventory	19500
Increase in note payable	30500
Decrease in accounts payable	-20500
Net cash provided by operating activities		153500
Cash flows from investing activities:
Cash paid to acquire new buildings	-129000
Net cash used for investing activities		-129000
Cash flows from financing activities:
Cash received from issuance of long-term debt	44000
Cash received from issuance of common stock	5000
Payment of cash dividends on common stock	-66000
Net cash used by financing activities		-17000
Net increase in cash for the year		7500
Cash balance, January 1, 2020		48500
Cash balance, December 31, 2020		56000