Question

Comparative balance sheet statements of Irving Inc. are presented below:

Irving Inc.

COMPARATIVE BALANCE SHEET ACCOUNTS

December 31, 2017 and 2016

	December 31
Assets	2017	2016
Cash	25,000	20,000
Accounts receivable	45,500	48,000
Less: allowance for doubtful accounts	(1,500)	(1,000)
Inventory	55,000	50,000
Dividend receivable	3,000	2,000
Investments	13,000	10,000
Land	70,000	40,000
Buildings & equipment	231,000	250,000
Less: accumulated depreciation	(35,000)	(50,000)
Totals	406,000	369,000
Liabilities
Accounts payable	13,000	20,000
Salaries payable	2,000	5,000
Interest payable	4,000	2,000
Income tax payable	7,000	8,000
Note payable	20,000	0
Bonds payable	98,000	70,000
Less: discount on bonds	(2,000)	(3,000)
Shareholders’ equity
Common stock	210,000	200,000
Paid-in-capital-excess of par	25,000	20,000
Retained earnings	39,000	47,000
Less: treasury stock (at cost)	(10,000)	0
total	406,000	369,000

Additional data (all transactions occurred in 2017 unless otherwise speciated):

1. l. There were no write-offs of uncollectible accounts in 2017.
2. A building that originally cost $30,000 with accumulated depreciation balance of $20,000 was sold for $4,000.
3. The common stock of Joys Corporation was purchased for $3,000 as a long-term investment.
4. Land was acquired by paying $10.000 cash and issuing a 13%, seven-year, $20.000 note payable to the seller.
5. New equipment was purchased for $11,000 cash.
6. On January l, $28,000 or bonds sold at face value.
7. On January 19, Irving issued a 5% stock dividend (1 ,000 shares). The market price of the $10 par value common stock was $15 per share at that time.
8. Cash dividends of $15,000 were paid to shareholders.
9. On November 12, 500 shares of common stock were repurchased as treasury stock at a cost of $10,000. Irving uses the cost method to account for treasury stock.

Irving's 2017 income statement follows (ignore taxes):

Revenues
Sales	200,000
Dividend revenue	3,000	203,000
Expenses
Cost of goods sold	120,000
Operating expenses	26,000
Depreciation expense	5,000
Interest expense	8,000
Loss on sale of building	6,000
Income tax expense	16,000	181,000
Net income		22,000

Required:

Prepare a statement of cash flows for the year ended 2017 using the indirect method.

Answer 1

The answer has been presented in the supporting sheets. All the parts has been solved with detailed explanation and format. For detailed answers refer to the supporting sheets.

47 Answer Irving Inc. 48 49 Statement of cash flows For the year ended December 31, Year 2017 50 51 Cash Flows from operating activities 52 Net Income 22000 53 Adjustment to reconcile Net Income to net cash flow from operating activities 54 Loss on sale of Building 6000 5000 55 Depreciation expense 56 Decrease in net account recievable (47000-44000) 3000 (5000) 57 Increase in inventory (55000-50000) 58 Increase in dividend recievable (3000-2000) (1000) (7000) (3000) 59 Decrease in accounts payable (20000-13000) 60 Decrease in Salaries payable (5000-2000 61 Increase in interest payable (4000-2000) 2000 62 Decrease in income tax payable (8000-7000) (1000) 63 Decrease in bond payable 1000 64 Net cash flow from operating activities 22000 65 Cash flow from (usedfor) investing activities 66 Cash from sale of building 4000 (3000) 67 Cash paid for purchase of investments 68 Cash paid for purchase of land (10000) Cash paid for equipment purchased (11000) 69 70 Net cash flow used for investing activities (20000)

71 Cash flow from (used) for financing activities 72 Cash from issuance of bonds (15000) 73 Cash dividend paid 74 Cash paid for treasury stock purchased (10000) 75 Net cash flow from financing activities 3000 76 Decrease in cash 5000 77 Cash at the beginning of the year 78 Cash at the end of the year 25000 79 Note 80 Non Cash Investing and Financing activities 81 Note payable issued for purchase of land 20000