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	$642,720.00	$679,910.00
4	Accounts receivable (net)	567,220.00	547,910.00
5	Inventories	1,010,310.00	982,080.00
6	Investments	0.00	240,170.00
7	Land	519,640.00	0.00
8	Equipment	879,880.00	679,710.00
9	Accumulated depreciation	(243,670.00)	(201,010.00)
10	Total assets	$3,376,100.00	$2,928,770.00
11	Liabilities and Stockholders’ Equity
12	Accounts payable (merchandise creditors)	$772,410.00	$749,340.00
13	Accrued expenses payable (operating expenses)	64,300.00	70,620.00
14	Dividends payable	8,580.00	7,170.00
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	2,066,810.00	1,877,640.00
18	Total liabilities and stockholders’ equity	$3,376,100.00	$2,928,770.00

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

1	Sales		$5,978,490.00
2	Cost of goods sold		2,451,600.00
3	Gross profit		$3,526,890.00
4	Operating expenses:
5	Depreciation expense	$42,660.00
6	Other operating expenses	3,100,820.00
7	Total operating expenses		3,143,480.00
8	Operating income		$383,410.00
9	Other expense:
10	Loss on sale of investments		(64,020.00)
11	Income before income tax		$319,390.00
12	Income tax expense		103,180.00
13	Net income		$216,210.00

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 $176,150 cash
	d. The common stock was issued for cash.
	e. There was a $27,040 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.

Answer 1

Note: Please confirm exact wordings for text entries from the Labels and Amount Descriptions list since the same is not provided with the question.

CANACE PRODUCTS INC
Statement of Cash Flows
For the Year Ended December 31, 20Y6
(Direct Method)
Cash Flows from Operating Activities:
Cash receipts:
Cash received from customers		5959180
Cash payments:
Cash paid for merchandise	-2456760
Cash paid for operating expenses	-3107140
Cash paid for income taxes	-103180	-5667080
Net cash provided by operating activities		292100
Cash Flows from Investing Activities:
Proceeds from sale of investments	176150
Purchase of land	-519640
Purchase of equipment (879880 - 679710)	-200170
Net cash used by investing activities		-543660
Cash Flows from Financing Activities:
Issuance of Common stock	240000
Payment of cash dividends	-25630
Net cash provided by financing activities		214370
Net decrease in cash		-37190
Cash, December 31, 20Y5		679910
Cash, December 31, 20Y6		642720

Workings:

Cash received from customers:
Sales Revenue	5978490
Less: Increase in Accounts Receivable (567220 - 547910)	19310
	5959180
Cash paid for merchandise:
Cost of goods sold	2451600
Add: Increase in Inventory (1010310 - 982080)	28230
Less: Increase in Accounts Payable (772410 - 749340)	23070
	2456760
Cash paid for operating expenses:
Operating expenses	3100820
Add: Decrease in accrued expenses payable (70620 - 64300)	6320
	3107140
Cash paid for dividends:
Dividends payable, Dec. 31, 20Y5	7170
Add: Cash dividends declared	27040
	34210
Less: Dividends payable, Dec. 31, 20Y6	8580
	25630