Question

Problem 23-08

Comparative balance sheet accounts of Coronado Company are presented below.

CORONADO COMPANY COMPARATIVE BALANCE SHEET ACCOUNTS AS OF DECEMBER 31
Debit Balances		2020		2019
Cash		$69,600		$51,100
Accounts Receivable		156,500		130,000
Inventory		75,700		60,800
Debt investments (available-for-sale)		55,000		85,300
Equipment		69,600		47,800
Buildings		144,900		144,900
Land		39,600		25,200
Totals		$610,900		$545,100
Credit Balances
Allowance for Doubtful Accounts		$10,000		$8,000
Accumulated Depreciation—Equipment		20,800		14,100
Accumulated Depreciation—Buildings		37,000		27,900
Accounts Payable		66,500		59,800
Income Taxes Payable		11,900		10,000
Long-Term Notes Payable		62,000		70,000
Common Stock		310,000		260,000
Retained Earnings		92,700		95,300
Totals		$610,900		$545,100

Additional data:

1.		Equipment that cost $10,000 and was 60% depreciated was sold in 2020.
2.		Cash dividends were declared and paid during the year.
3.		Common stock was issued in exchange for land.
4.		Investments that cost $34,800 were sold during the year.
5.		There were no write-offs of uncollectible accounts during the year.

Coronado’s 2020 income statement is as follows.

Sales revenue					$955,000
Less: Cost of goods sold					601,700
Gross profit					353,300
Less: Operating expenses (includes depreciation expense and bad debt expense)					252,500
Income from operations					100,800
Other revenues and expenses
Gain on sale of investments		$15,000
Loss on sale of equipment		(2,900	)		12,100
Income before taxes					112,900
Income taxes					45,300
Net income					$67,600

(a) Compute net cash provided by operating activities under the direct method. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Net cash flow from operating activities

$

(b) 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).)

		$
	$
		$
		$

Answer 1

Requirement:A

Net cash flow from operating activities

$ 46,500

Requirement:B

CORONADO COMPANY
Statement of Cash Flows [Indirect Method]
For the Year Ended December 31, 2020
Cash flows from operating activities:
Net Income	$       67,600
Adjustments to reconcile net income to net cash provided by operating activities
Income statement items not affecting cash
Depreciation expense	$       21,800
Loss on sale of equipment	$         2,900
Gain on sale of investments	$    (15,000)
Changes in current operating assets and liabilities
Increase in Account Receivables	$    (24,500)
Increase in Inventory	$    (14,900)
Increase in accounts payable	$         6,700
Increase in income taxes payable	$         1,900
Net cash provided by operating activities[A]		$          46,500
Cash flow from investing activities:
Purchase of Equipment	$    (31,800)
Sale of Equipment	$         1,100
Purchase of investments	$       (4,500)
Sale of Investments	$       49,800
Net cash used by investing activities[B]		$          14,600
Cash flow from financing activities:
Payment of Notes Payable	$       (8,000)
Issue on Common Stock	$       35,600
Payment of Dividend	$    (70,200)
Net Cash used by financing activities (C )		$        (42,600)
Net increase(decrease) in cash		$          18,500
Cash balance at prior year-end		$          51,100
Cash balance at current year-end		$          69,600

Working:

Investments
Beg Balance	$       85,300	Sale of investments	$        34,800
Purchase of investments	$          4,500
End Balance	$       55,000
Property, plant, and equipment
Beg Balance	$       47,800	Asset Sold	$        10,000
Asset Purchased	$       31,800
End Balance	$       69,600
Retained Earnings
Dividends Paid	$       70,200	Beg Balance	$        95,300
		Net Income	$        67,600
		End Balance	$        92,700
Accumulated Depreciation
Depreciation [Of Sold Asset]	$          6,000	Beg Balance	$        42,000
		Depreciation Expense	$        21,800
		End Balance	$        57,800