Question

Following are selected balance sheet accounts of Despacito Corp. at December 31, 2018 and 2017, and the increases or decreases in each account from 2017 to 2018. Also presented is selected income statement information for the year ended December 31, 2018, and additional information.

Selected balance sheet accounts                    2018                2017                (Decrease)     

Assets:

   Accounts receivable                                   $100,000            $ 94,000              6,000

   Inventory                                                      55,000           70,000           (15,000)

   Prepaid Expenses                                                30,000              25,000               5,000

   Property, plant, and equipment                   400,000          200,000           200,000

   Accumulated depreciation                             (200,000)        (180,000)             20,000

   Deferred tax asset                                               30,000             40,000             (10,000)

Liabilities and stockholders’ equity:

   Accounts payable                                            400,000        420,000             (20,000)

   Interest payable                                                     8,000              6,000               2,000

   Accrued expenses payable                                 10,000              7,000               3,000

   Dividends payable                                            30,000             25,000                5,000

   Taxes payable                                                        45,000            35,000               10,000

   Deferred tax liability                                            18,000             13,000                5,000

   Bonds payable                                                  180,000        100,000              80,000

   Discount on bonds payable                                 16,000                8,000               8,000

   Common stock, $1 par                                       40,000           10,000               30,000

   Additional paid-in capital                                120,000           50,000               70,000

   Retained earnings                                        1,010,000         1,000,000             10,000

Selected income statement information for the year ended December 31, 2018

Sales revenue                          $800,000

Cost of goods sold                   300,000

Operating expenses                  200,000

Interest expense                          12,000

Depreciation                              100,000

Gain on sale of equipment          20,000

Loss on retirement of bonds      10,000

Tax expense                                   60,000

Net income                                  80,000

Additional information

-Accounts receivable relates to sales of merchandise.

-During 2018, equipment costing $50,000 was sold for cash.

-During 2018, equipment costing $100,000 with a book value of $40,000 was exchanged for similar equipment.

-During 2018, $60,000 face value bonds payable were issued at $50,000 in exchange for property plant, and equipment. In addition, bonds were issued at par for cash.

-During 2018, $50,000 of bonds payable originally issued at par were retired

-During 2018, 10,000 shares of $1 par common stock were issued for cash.

-During 2018, issued 20,000 shares of $1 par common stock as a result of a stock dividend. The fair value of the shares was $100,000.

REQUIRED: Item 1-11 represents activities that will be reported in Despacito’s statement of cash flows for the year ended December 31, 2018. Determine the amount that should be reported in Despacito’s 2018 statement of cash flows. Enter your answers in the space below

Items to be answered:

1. Payments for purchase of property plant and equipment     _______________
2. Proceeds from sale of equipment _____________
3. Cash dividends paid                         _____________
4. Cash received from issuance of bonds   ________________
5. Cash paid for retirement of bonds    __________________
6. Cash received from issuance of common stock   _______________
7. Cash paid for taxes        ______________________

Answer 1

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