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Condensed financial data of Novak Corp. follow. Novak Corp. Comparative Balance Sheets December 31 Assets 2017...

Condensed financial data of Novak Corp. follow.

Novak Corp.
Comparative Balance Sheets
December 31

Assets

2017

2016

Cash

$ 110,696

$ 66,308

Accounts receivable

120,286

52,060

Inventory

154,125

140,905

Prepaid expenses

38,908

35,620

Long-term investments

189,060

149,330

Plant assets

390,450

332,225

Accumulated depreciation

(68,500

)

(71,240

)

Total

$935,025

$705,208

Liabilities and Stockholders’ Equity

Accounts payable

$ 139,740

$ 92,201

Accrued expenses payable

22,605

28,770

Bonds payable

150,700

200,020

Common stock

301,400

239,750

Retained earnings

320,580

144,467

Total

$935,025

$705,208

Novak Corp.
Income Statement Data
For the Year Ended December 31, 2017

Sales revenue

$532,190

Less:
     Cost of goods sold

$185,580

     Operating expenses, excluding depreciation

17,002

     Depreciation expense

63,705

     Income tax expense

37,374

     Interest expense

6,480

     Loss on disposal of plant assets

10,275

320,416

Net income

$ 211,774


Additional information:

1. New plant assets costing $137,000 were purchased for cash during the year.
2. Old plant assets having an original cost of $78,775 and accumulated depreciation of $66,445 were sold for $2,055 cash.
3. Bonds payable matured and were paid off at face value for cash.
4. A cash dividend of $35,661 was declared and paid during the year.


Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Solutions

Expert Solution

Solution:

Novak Corp.
Statement of Cash Flows
For the year ended 2017
Particulars Details Amount
Cash Flow from Operating Activities:
Net Income $211,774.00
Adjustments to reconcile net income to net cash provided by operations:
Depreciation Expense $63,705.00
Loss on disposal of plant assets $10,275.00
Increase in accounts receivables ($120,286 - $52,060) -$68,226.00
Increase in inventory ($154,125 - $140,905) -$13,220.00
Increase in prepaid expenses ($38,908 - $35,620) -$3,288.00
Increase in accounts payable ($139,740 - $92,201) $47,539.00
Decrease in accrued expenses payable ($28,770 - $22,605) -$6,165.00
Net Cash provided (used) by operating activities $242,394.00
Cash Flow from Investing Activities:
Purchase of plant assets -$137,000.00
Sale of plant assets $2,055.00
Purchase of investment ($189,060 - $149,330) -$39,730.00
Net Cash provided (used) in Investing activities -$174,675.00
Cash Flow from Financing Activities:
Dividend Paid -$35,661.00
Repayment of bonds ($200,020 - $150,700) -$49,320.00
Proceed from issue of common stock ($301,400 - $239,750) $61,650.00
Net Cash provided (used) in financing activities -$23,331.00
Net Increase / (Decrease) in Cash $44,388.00
Cash balance at beginning of year $66,308.00
Cash balance at end of year $110,696.00

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