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In: Accounting

Problem 23-4 Crane Company had the following information available at the end of 2017. CRANECOMPANY COMPARATIVE...

Problem 23-4

Crane Company had the following information available at the end of 2017.

CRANECOMPANY
COMPARATIVE BALANCE SHEETS
AS OF DECEMBER 31, 2017 AND 2016

2017

2016

Cash

$9,930

$4,010

Accounts receivable

20,450

12,910

Short-term investments

22,070

30,030

Inventory

42,300

35,310

Prepaid rent

3,020

12,090

Prepaid insurance

2,090

90

Supplies

1,010

75

Land

124,270

175,470

Buildings

353,500

353,500

Accumulated depreciation—buildings

(105,150

)

(87,890

)

Equipment

526,140

396,090

Accumulated depreciation—equipment

(129,450

)

(111,310

)

Patents

45,390

49,550

   Total assets

$915,570

$869,925

Accounts payable

$21,800

$32,080

Income taxes payable

5,020

3,970

Salaries and wages payable

4,950

3,000

Short-term notes payable

10,060

10,060

Long-term notes payable

60,060

69,370

Bonds payable

397,380

397,380

Premium on bonds payable

30,200

32,145

Common stock

239,140

221,530

Paid-in capital in excess of par—common stock

24,850

17,400

Retained earnings

122,110

82,990

   Total liabilities and stockholders’ equity

$915,570

$869,925

CRANE COMPANY
INCOME STATEMENT AND DIVIDEND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 2017

Sales revenue

$1,157,060

Cost of goods sold

748,200

408,860

Gross margin
Operating expenses
   Selling expenses

$78,550

   Administrative expenses

156,290

   Depreciation/Amortization expense

39,560

   Total operating expenses

274,400

Income from operations

134,460

Other revenues/expenses
   Gain on sale of land

7,950

   Gain on sale of short-term investment

3,980

   Dividend revenue

2,380

   Interest expense

(51,810

)

(37,500

)

Income before taxes

96,960

Income tax expense

39,460

Net income

57,500

Dividends to common stockholders

(18,380

)

To retained earnings

$39,120


Prepare a statement of cash flows for Crane Company using the direct method accompanied by a reconciliation schedule. Assume the short-term investments are debt securities, classified as available-for-sale. (Show amounts in the investing and financing sections that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Solutions

Expert Solution

Crane Company
Statement of Cash Flows
For the year ended December 31, 2017
Cash Flows from Operating Activities
Cash receipts from customers $ 1,149,520.00
Cash paid to suppliers of inventory $   -765,470.00
Cash paid for operating expenses $   -226,755.00
Cash paid for income taxes $     -38,410.00
Net Cash Flows from Operating Activities $ 118,885.00
Cash Flows from Investing Activities
Dividend Revenue $        2,380.00
Cash received from sale of land $      59,150.00
Cash received from sale of short term investments $      11,940.00
Cash paid for acquiring equipment $   -130,050.00
Net cash used in Investing Activities $ -56,580.00
Cash Flows from Financing Activities
Cash received from the issuance of common stock $      25,060.00
Cash paid for retiring long term notes payable $       -9,310.00
Cash paid for dividends $     -18,380.00
Cash paid for interest $     -53,755.00
Net cash used in Financing Activities $ -56,385.00
Net increase in cash $     5,920.00
Cash, December 31, 2016 $     4,010.00
Cash, December 31, 2017 $     9,930.00

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