Question

Statement of Cash Flows

Jacoby Corporation, a merchandiser, recently completed its calendar year 2016 operations. For the year:

•  All sales are credit sales

•  All credits to Accounts Receivable reflect cash receipts from customers

•  All purchases of inventory are on credit

•  All debits to Accounts Payable reflect cash payments for inventory

•  Other expenses are paid in advance and are initially debited to Prepaid Expenses.

•  The company’s balance sheets and income statement follow.

  Jacoby Corporation Balance Sheet December 31, 2015 and 2016

ACG2071 - 2185

	2016	2015
Assets
Cash	$136,500	$71,550
Accounts receivable	74,100	90,750
Merchandise inventory	454,500	490,200
Prepaid expenses	17,100	19,200
Equipment	278,250	216,000
Accumulated depreciation	(108,750)	(93,000)
Total Assets	$851,700	$794,700
Liabilities
Accounts payable	$117,450	$123,450
Short-term notes payable	17,250	11,250
Long-term notes payable	112,500	82,500
Common stock, $5 par	465,000	450,000
Paid in capital in excess	18,000	0
Retained earnings	121,500	127,500
TOTAL Liabilities	$851,700	$794,700

Jacoby Corporation Income Statement December 31, 2016

Sales		$1,083,000
Cost of goods sold		585,000
Gross profit		498,000
Operating Expenses
Depreciation expense	$36,600
Other expenses	392,850
Total operating expenses		429,450
		68,550
Gain and losses
Loss on sale of equipment		2,100
Income before taxes		66,450
Income tax expense		9,450
Net income		$57,000

Page 1 of 2

Additional Information on Year 2011 Transactions

1. Thelossonthecashsaleofequipmentwas$2,100(detailsinb).

2. Sold equipment costing $51,000, with accumulated depreciation of $20,850, for $28,050 cash.

3. Purchased equipment costing $113,250 by paying $38,250 cash and signing a long-term note

   payable for the balance

4. Borrowed $6,000 cash by signing a short-term note payable.

5. Paid$45,000cashtoreducethelong-termnotespayable.

6. Issued 3,000 shares of common stock for $11 cash per share.

7. Declaredandpaidcashdividendsof$63,000.

Answer 1

Jacoby Corporation
Statement of cash flow
Cash flows from operating activities
Net Income		$57,000
Adjustments to reconcile net income to net cash provided by operations:
Depreciation expense	36,600
Accounts receivable decrease (90750-74,100)	16,650
Inventory decrease(454500-490200)	35,700
Prepaid expense decrease(17100-19200)	$2,100
Accounts payable decrease(117450-123450)	-6,000
Loss on disposal of equipment	2,100
		87,150
Net cash provided by operating activities		144,150
Cash flows from investing activities
Cash paid for equipment	-38,250
Cash received from sale of equipment	28,050
Net cash used in investing activities		-10,200
Cash flows from financing activities:
Cash borrowed on short-term note	6,000
Cash paid on long-term note	-45,000
Cash received from issuing stock(3000*11)	33,000
Cash paid for dividends	-63,000
Net cash used in financing activities		-69,000
Net increase (decrease) in cash		64,950
Cash balance at beginning of year		71550
Cash balance at end of year		136,500