Question

The following information was taken from Lamberson Company's accounting records:

	Account Balances
Account Titles	January 1, 2016	December 31, 2016
Debits
Cash	$ 1,400	$ 2,400
Accounts Receivable (net)	2,800	2,690
Marketable Securities (at cost)	1,700	3,000
Allowance for Change in Value	500	800
Inventories	8,100	7,910
Prepaid Items	1,300	1,710
Investments (long-term)	7,000	5,400
Land	15,000	15,000
Buildings and Equipment	32,000	46,200
Discount on Bonds Payable	—	290
	$69,800	$85,400
Credits
Accumulated Depreciation	$16,000	$16,400
Accounts Payable	3,800	4,150
Income Taxes Payable	2,400	2,504
Wages Payable	1,100	650
Interest Payable	—	400
Note Payable (long-term)	3,500	—
12% Bonds Payable	—	10,000
Deferred Taxes Payable	800	1,196
Convertible Preferred Stock, $100 par	9,000	—
Common Stock, $10 par	14,000	21,500
Additional Paid-in Capital	8,700	13,700
Unrealized Increase in Value of Marketable Securities	500	800
Retained Earnings	10,000	14,100
	$69,800	$85,400

Additional information for the year:

1. Sales		$ 39,930
   Cost of goods sold		(19,890)
   Depreciation expense		(2,100)
   Wages expense		(11,000)
   Other operating expenses		(1,000)
   Bond interest expense		(410)
   Dividend revenue		820
   Gain on sale of investments		700
   Loss on sale of equipment		(200)
   Income tax expense		(2,050)
   Net income		$ 4,800

2. Dividends declared and paid totaled $700.
3. On January 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.
4. Long-term nonmarketable investments that cost $1,600 were sold for $2,300.
5. The long-term note payable was paid by issuing 250 shares of common stock at the beginning of the year.
6. Equipment with a cost of $2,000 and a book value of $300 was sold for $100. The company uses one Accumulated Depreciation account for all depreciable assets.
7. Equipment was purchased at a cost of $16,200.
8. The 12% bonds payable were issued on August 31, 2016, at 97. They mature on August 31, 2026. The company uses the straight-line method to amortize the discount.
9. Taxable income was less than pretax accounting income, resulting in a $396 increase in deferred taxes payable.
10. Short-term marketable securities were purchased at a cost of $1,300. The portfolio was increased by $300 to a $3,800 fair value at year-end by adjusting the related allowance account.

Required

1. Prepare a spreadsheet to support Lamberson Company's 2016 statement of cash flows. Use the minus sign to indicate cash outflows, a decrease in cash or cash payments.

   LAMBERSON COMPANY Cash Flows Worksheet For Year Ended December 31, 2016
   	Balances			Worksheet Entries
   Account Titles	01/01/2016	12/31/2016	Change	Debit	Credit
   Debits
   Cash	1,400	2,400
   Noncash Accounts:
   Accounts Receivable	2,800	2,690
   Marketable Securities	1,700	3,000
   Allow for Change in Value	500	800
   Inventories	8,100	7,910
   Prepaid Items	1,300	1,710
   Investments (long-term)	7,000	5,400
   Land	15,000	15,000
   Buildings and Equipment	32,000	46,200
   Discount on Bonds Payable		290
   Totals	69,800	85,400
   Credits
   Accumulated Depreciation	16,000	16,400
   Accounts Payable	3,800	4,150
   Income taxes Payable	2,400	2,504
   Wages Payable	1,100	650
   Interest Payable		400
   Notes Payable (long-term)	3,500
   12% Bonds Payable		10,000
   Deferred Income Taxes	800	1,196
   Convertible Preferred Stock	9,000
   Common Stock, $10 par	14,000	21,500
   Additional Paid-in Capital	8,700	13,700
   Unrealized Increase in Value of Marketable Securities	500	800
   Retained Earnings	10,000	14,100
   Totals	69,800	85,400

   	Worksheet Entries
   	Debit	Credit
   Cash Flows from Operating Activities:
   Net income
   Add: Depreciation expense
   Add: Loss from sale of building
   Cash Flows from Investing Activities:
   Cash Flows from Financing Activities:
   Investing and Financing Activities Not Affecting Cash:
   Totals

2. Prepare the statement of cash flows.

   LAMBERSON COMPANY Statement of Cash Flows For Year Ended December 31, 2016
   Operating Activities:
   Adjustment for noncash income items:
   Adjustments for cash flow effects from working capital items:
   Net cash provided by operating activities
   Investing Activities:
   Net cash used for investing activities
   Financing Activities:
   Net cash provided by financing activities
   Cash, January 1, 2016
   Cash, December 31, 2016

3. Compute the cash flow from operations to sales ratio and the profit margin ratio for 2016. Round your answers to one decimal place.
   1. Cash flows from operations ratio :
   2. Profit margin:

Answer 1

1.

2.

3.

The difference in the results of the two ratios is due primarily to the $2,100 depreciation expense, which was deducted to compute net income, but did not involve an operating cash outflow.