Question

In: Accounting

Golden Corp., a merchandiser, recently completed its 2017 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers

 

Golden Corp., a merchandiser, recently completed its 2017 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, (5) Other Expenses are all cash expenses, and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes. The company’s balance sheets and income statement follow.

GOLDEN CORPORATION
Comparative Balance Sheets
December 31, 2017 and 2016
  2017   2016
Assets              
Cash $ 165,000     $ 108,100  
Accounts receivable   84,500       72,000  
Inventory   602,500       527,000  
Total current assets   852,000       707,100  
Equipment   337,600       300,000  
Accum. depreciation—Equipment   (158,500 )     (104,500 )
Total assets $ 1,031,100     $ 902,600  
Liabilities and Equity              
Accounts payable $ 89,000     $ 72,000  
Income taxes payable   29,000       25,600  
Total current liabilities   118,000       97,600  
Equity              
Common stock, $2 par value   594,000       569,000  
Paid-in capital in excess of par value, common stock   197,000       161,500  
Retained earnings   122,100       74,500  
Total liabilities and equity $ 1,031,100     $ 902,600  
 

  

GOLDEN CORPORATION
Income Statement
For Year Ended December 31, 2017
Sales       $ 1,797,000
Cost of goods sold         1,087,000
Gross profit         710,000
Operating expenses          
Depreciation expense $ 54,000      
Other expenses   495,000     549,000
Income before taxes         161,000
Income taxes expense         23,400
Net income       $ 137,600
 

Problem 12-6A Indirect: Statement of cash flows LO P1, P2, P3

Additional Information on Year 2017 Transactions

  1. Purchased equipment for $37,600 cash.
  2. Issued 12,100 shares of common stock for $5 cash per share.
  3. Declared and paid $90,000 in cash dividends.


Required:
Prepare a complete statement of cash flows; report its cash inflows and cash outflows from operating activities according to the indirect method. (Amounts to be deducted should be indicated with a minus sign.)
  

Solutions

Expert Solution

 

GOLDEN CORPORATION
Cash flow Statement  
For the Year ended December 31,2017
     
Cash Flow from Operating Activities:    
Net Income $     137,600.00  
Adjustments to reconcile net income to net cash provided by operations    
Income statement items not affecting cash    
Depreciation Expense $        54,000.00  
Changes in current assets and current liabilities    
Increase in Accounts Receivables $     (12,500.00)  
Increase in Inventory $     (75,500.00)  
Increase in Accounts payable $        17,000.00  
Increase in Income taxes payable $          3,400.00  
A. Cash Outflow from Operating Activities   $   124,000.00
     
cash flow from investing activities    
Purchase of Equipment $     (37,600.00)  
B.Net cash used by investing activities   $   (37,600.00)
     
Cash flows from Financing activities    
Payment of Dividend $     (90,000.00)  
Issue of Common Stock $        60,500.00  
C. Net cash Used in financing activities   $   (29,500.00)
(A+B+C) Net increase (Decrease) in cash and Cash Equivalent   $     56,900.00
Cash balance, December 31, prior year   $   108,100.00
Cash balance, December 31, current year   $   165,000.00

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