Question

Following are selected balance sheet accounts of Del Conte Corp. at December 31, 2018 and 2017, and the increases or decreases in each account from 2017 to 2018. Also presented is selected income statement information for the year ended December 31, 2018, and additional information.

Selected Balance Sheet Accounts	2018			2017			Increase (Decrease)
Assets
Accounts receivable	$	42,000		$	28,000		$	14,000
Property, plant, and equipment		285,000			251,000			34,000
Accumulated depreciation		(186,000	)		(171,000	)		15,000
Liabilities and Stockholders’ Equity
Bonds payable		61,000			54,000			7,000
Dividends payable		10,000			6,600			3,400
Common stock, $1 par		30,000			23,000			7,000
Additional paid-in capital		11,000			4,600			6,400
Retained earnings		112,000			95,000			17,000
Selected Income Statement Information for the Year Ended December 31, 2018
Sales revenue	$	163,000
Depreciation		41,000
Gain on sale of equipment		15,000
Net income		36,000

Additional information:

Accounts receivable relate to sales of merchandise.

During 2018, equipment costing $48,000 was sold for cash.

During 2018, bonds payable with a face value of $28,000 were issued in exchange for property, plant, and equipment. There was no amortization of bond discount or premium.

Required:
Items 1 through 5 represent activities that will be reported in Del Conte's statement of cash flows for the year ended December 31, 2018. The following two responses are required for each item:

Determine the amount that should be reported in Del Conte's 2018 statement of cash flows.

Select the category (i.e., O - Operating activity, I - Investing activity and F - Financing activity) in which the amount should be reported in the statement of cash flows.

Answer 1

Following will be reported as operating activities :-

Increase in accounts receivable amounting to $14000

Following will be reported as investing activities

Proceeds from sale of equipment amounting to $37000 (see note 1)

Purchase of property plant and equipment amounting to ($54000) [see note 2]

Following will be reported as financing activities :-

Proceeds from issue of common stock amounting to $7000+$6400 = $13400.

Bonds repaid amounting to ($21000) [see note 3]

Note 1

Accumulateddepreciation

To property plant & equipment	26000	Bal b/d	171000
		By profit & loss	41000
Bal c/d	186000

This book value of equipment sold = 48000-26000 = $22000

Value at which it is sold = $22000+$15000 = $37000

2 . Property plant and equipment account

Bal b/d	251000	by accumulated dep	26000
To gain on sale	15000	By bank	37000
To bank (bal rog) To bonds	54000 28000	Bal c/d	285000

3. Bonds payable account

To bank (bal fig)	21000	Bal b/d	54000
		By equipment	28000
Bal c/d	61000