Question

The comparative balance sheet of Canace Products Inc. for December 31, 20Y6 and 20Y5, is as follows:

1		Dec. 31, 20Y6	Dec. 31, 20Y5
2	Assets
3	Cash	$643,460.00	$679,530.00
4	Accounts receivable (net)	566,490.00	548,320.00
5	Inventories	1,010,720.00	982,600.00
6	Investments	0.00	240,910.00
7	Land	519,510.00	0.00
8	Equipment	879,710.00	680,990.00
9	Accumulated depreciation	(243,750.00)	(200,970.00)
10	Total assets	$3,376,140.00	$2,931,380.00
11	Liabilities and Stockholders’ Equity
12	Accounts payable (merchandise creditors)	$772,290.00	$748,770.00
13	Accrued expenses payable (operating expenses)	63,970.00	69,800.00
14	Dividends payable	8,000.00	7,040.00
15	Common stock, $2 par	56,000.00	32,000.00
16	Paid-in capital: Excess of issue price over par—common stock	408,000.00	192,000.00
17	Retained earnings	2,067,880.00	1,881,770.00
18	Total liabilities and stockholders’ equity	$3,376,140.00	$2,931,380.00

The income statement for the year ended December 31, 20Y6, is as follows:

1	Sales		$5,974,620.00
2	Cost of goods sold		2,451,470.00
3	Gross profit		$3,523,150.00
4	Operating expenses:
5	Depreciation expense	$42,780.00
6	Other operating expenses	3,099,440.00
7	Total operating expenses		3,142,220.00
8	Operating income		$380,930.00
9	Other expense:
10	Loss on sale of investments		(64,890.00)
11	Income before income tax		$316,040.00
12	Income tax expense		102,160.00
13	Net income		$213,880.00

Additional data obtained from an examination of the accounts in the ledger for 20Y6 are as follows:

	a. Equipment and land were acquired for cash.
	b. There were no disposals of equipment during the year.
	c. The investments were sold for $176,020 cash
	d. The common stock was issued for cash.
	e. There was a $27,770 debit to Retained Earnings for cash dividends declared.

Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities. Be sure to complete the heading of the statement. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Enter amounts that represent cash outflows as negative numbers using a minus sign.

X

Labels and Amount Descriptions

Labels and Amount Descriptions
Cash paid for dividends
Cash paid for purchase of equipment
Cash paid for purchase of land
Cash paid for purchase of treasury stock
Cash payments for income taxes
Cash payments for merchandise
Cash payments for operating expenses
Cash received from customers
Cash received from sale of common stock
Cash received from sale of investments
Change in cash
December 31, 20Y6
Depreciation
For the Year Ended December 31, 20Y6
Gain on sale of investments
Issuance of common stock for acquisition of land
Issuance of common stock for purchase of equipment
Loss on sale of investments
Net cash flow from financing activities
Net cash flow from investing activities
Net cash flow from operating activities
Net cash flow used for financing activities
Net cash flow used for investing activities
Net cash flow used for operating activities

X

Statement of Cash Flows

Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities. Be sure to complete the heading of the statement. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Enter amounts that represent cash outflows as negative numbers using a minus sign.

Canace Products Inc.

Statement of Cash Flows

1	Cash flows from operating activities:
2
3

Answer 1

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Canace Products Inc.	Amount $		Answer a
Cash Received from sale			Cash Flow Direct Method	Amount $	Amount $
Opening Accounts Receivable	548,320.00		Cash Receipts from
Add: Sales	5,974,620.00		Cash Received from sale	5,956,450.00		See A
Less: Closing Accounts Receivable	566,490.00		Total cash inflows		5,956,450.00
Cash Received from sale	5,956,450.00	A	Cash paid for Inventory purchased	2,456,070.00		See C
			Cash paid for Operating Expense	3,105,270.00		See D
Inventory purchased			Income Tax paid	102,160.00
Cost of goods sold	2,451,470.00		Total cash outflows		5,663,500.00
Add: Closing Inventory	1,010,720.00		Net Cash inflow from operating activities		292,950.00	J
Less: Opening Inventory	982,600.00
Inventory purchased	2,479,590.00	B	Cash Flow from Investing Activities
			Equipment purchased	(198,720.00)		See E
Cash paid for Inventory purchased			Land purchased	(519,510.00)		See F
Opening Accounts Payable	748,770.00		Investments sold	176,020.00
Add: Purchases	2,479,590.00	See B	Net Cash outflow from Investing Activities		(542,210.00)	K
Less: Closing Accounts Payable	772,290.00
Cash paid for Inventory purchased	2,456,070.00	C	Cash Flow from Financing Activities			See I
			Share capital issued	240,000.00		See G
Cash paid for Other operating expenses			Payment of dividends	(26,810.00)		See H
Other operating expenses	3,099,440.00		Net Cash inflow form Financing Activities		213,190.00	L
Add: Accrued expenses payable- opening	69,800.00
Less: Accrued expenses payable- closing	63,970.00		Net Increase in cash		(36,070.00)	M=J+K+L
Cash paid for Other operating expenses	3,105,270.00	D	Add: Beginning Cash Balance		679,530.00	N
			Ending cash Balance		643,460.00	O=M+N
Equipment purchased
Closing value	879,710.00
Less: Opening value	680,990.00
Equipment purchased	198,720.00	E
Land purchased
Closing value	519,510.00
Less: Opening value	-
Land purchased	519,510.00	F
Share capital issued
Closing balance- Common stock	56,000.00
Closing balance- Paid-in capital: Excess of issue price over par—common stock	408,000.00
Less: Opening balance- Common stock	32,000.00
Less: Opening balance- Paid-in capital: Excess of issue price over par—common stock	192,000.00
Share capital issued	240,000.00	G
Dividend paid
Dividend expense for the year	27,770.00
Add: Dividend payable- opening	7,040.00
Less: Dividend payable- closing	8,000.00
Dividend paid	26,810.00	H