Question

CHENG INC.

Comparative Balance Sheets

December 31

Assets

2017

2016

Cash

$118,000

$47,800

Accounts receivable

91,600

32,200

Inventory

113,000

102,900

Prepaid expenses

29,400

26,000

Investments

141,000

113,500

Equipment

265,700

241,600

Accumulated depreciation-equipment

(46,000

)

(51,400

)

Total

$712,700

$512,600

Liabilities and Stockholders’ Equity

Accounts payable

$111,300

$67,900

Accrued expenses payable

16,100

17,000

Bonds payable

110,700

149,500

Common stock

219,500

174,200

Retained earnings

255,100

104,000

Total

$712,700

$512,600

CHENG INC.

Income Statement

For the Year Ended December 31, 2017

Sales revenue$391,900

Less:

Cost of goods sold

$135,900

Operating expenses, excluding depreciation

11,600

Depreciation expense

29,500

Income tax expense

26,300

Interest expense

4,400

Loss on disposal of plant assets

7,500

215,200

Net income

$176,700

Additional information:

1.New equipment costing $79,400 were purchased for cash during the year.

2.Old equipment having an original cost of $55,300 was sold for $12,900 cash.

3.Bonds matured and were paid off at face value for cash.

4.A cash dividend of $25,600 was declared and paid during the year.

Prepare a statement of cash flows using the indirect method

Answer 1

CHENG INC
Statement of Cash flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net Income		$ 176,700
Adjustments to reconcile net income to ;
Depreciation expense	$   29,500
Loss on disposal of plant asset	$      7,500
Increase in accounts receivable	$ (59,400)
Increase in inventory	$ (10,100)
Increase in prepaid expense	$   (3,400)
Increase in accounts payable	$   43,400
Decrease in accrued expense payable	$       (900)
		$      6,600
Net cash provided by operating activities		$ 183,300
Cash flows from investing activities
Cash received from sale of equipment	$   12,900
Cash paid for purchase of equipment	$ (79,400)
Cash paid for purchase of investment	$ (27,500)
Net cash used by investing activities		$ (94,000)
Cash flows from financing activities
Cash dividends paid	$ (25,600)
Cash paid to retire bonds	$ (38,800)
Cash received from issuance of common stock	$   45,300
Net cash used by financing activities		$ (19,100)
Net Increase in cash and cash equivalents		$    70,200
Cash and cash equivalents at beginning of period		$    47,800
Cash and cash equivalents at end of period		$ 118,000

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