Question

The following selected information is available for Jones & Co. Ltd., for the year ended 31 December 20X8:

 

Other Information:

1. Equipment with an original cost of $100,000 was sold for cash.

2. Other equipment was bought for cash.

3. There is no income tax expense.

4. Cash dividends were paid during the year as well as a $50,000 stock dividend that reduced retained earnings and increased common shares.

 

Required:

Present, in good form, the operating, investing, and financing section of the SCF for the year ended 31 December 20X8 as far as possible. Also list the non-cash transactions that would be separately disclosed. You have not been provided with enough information (cash, other assets, and liabilities) to balance the SCF to the change in cash.

Answer 1

Jones and Co. Ltd

Partial Statement of Cash Flows

For the year ended 31 December 20x8

 

Operating activities:

      Net earnings.............................................................................                                 $297,000

      Plus/Less

                  Depreciation expense...................................................          90,000

                  Loss on sale .................................................................            30,000

                  Gain on sale.................................................................             (9,000) 

            Increase in inventory....................................................               (28,000)

                  

Investing activities:

      Purchased equipment...............................................................      (280,000)

      Proceeds on sale of equipment (1)...........................................         31,000

      Proceeds on sale of land ($100 - $30).....................................         70,000

      

Financing activities:

      Proceeds on issuance of shares................................................       100,000

      Repaid note payable................................................................          (40,000)

      Dividends paid ($612,000 + $297,000 - $50,000) 

                  vs. $704,000)...............................................................         ( 155,000)

                  

 

(1) $632,000 + $90,000 = $722,000 vs. $644,000; $78,000 of depreciation eliminated 

 NBV = $100,000 - $78,000 = $22,000 plus gain of $9,000 = proceeds of $31,000

 

Non-cash transaction, stock dividend of $50,000 that increased common shares and decreased retained earnings.

Non-cash transaction, stock dividend of $50,000 that increased common shares and decreased retained earnings.