Question

The following information has been reported by Laporte Inc. on its statements of financial position at December 31, 2016 and 2017, and on its statement of earnings for the year ended December 31, 2017. Amounts are in millions of dollars: Statements of Financial Position 2017 Cash $ 118 Accounts receivable 48 Merchandise inventory Long-term investments Property, plant, and equipment Accumulated depreciation (92) 2016 $ 82 38 46 42 238 196 (110) Total assets $ 354 $ 284 $ Accounts payable Income taxes payable Long-term borrowings Contributed capital Retained earnings 38 17 94 143 62 66 18 34 114 52 Total liabilities and shareholders' equity $ 354 $ 284 Statement of Earnings Sales $ 182 Cost of sales (98) Gross profit Depreciation expense Other operating expenses 84 (24) (41.0) Earnings from operations Gain on sale of investments Loss on sale of equipment 19.0 20 (16) Earnings before income tax Income tax expense 23.0 9.2 Net earnings $ 13.8

Answer 1

Solution LAPORITE INC. Statement of Cash Flows (Direct Method) For the Year Ended December 31, 2017 Cash flows from Operating Activities: Collections from customers (WN-1) Cash payments: To suppliers (WN-2) Other operating expenses For Income taxes (WN-3) $172.00 ($122.00) ($41.00) ($10.20) Net cash used for operating activities ($1.20) Cash flows from Investing Activities: Sale of long-term investment ($32 + $20) Sale of equipment (WN-5) Purchase of equipment (WN-6) $52.001 ($4.00) ($36.00) Net cash flow from investing activities $12.00 Cash flows from Financing Activities: Issuance of shares ($143 - $114) Dividends paid (WN-4) $29.00 ($3.80) Net cash flow from financing activities $25.200 Net increase in cash Cash balance, January 1, 2017 Cash balance, December 31, 2017 $36.00 $82.00 $118.00

WN-1: Collections from Customers Sales Revenue Add: Beginning Accounts Receivable Less: Ending Accounts Receivable Cash Collections from customers $182.00 $38.00 ($48.00) $172.00 WN-2 : Cash payments to suppliers Cost of Sales Add: Ending Merchandise Inventories Less: Beginning Merchandise Inventories Purchases Add: Beginning Accounts Payables Less: Ending Accounts Payables Cash payments to suppliers $98.00 $42.00 ($46.00) $94.00 $66.00 ($38.00) $122.00 WN-3: Cash payments for Income taxes Income tax expense Add: Beginning Income Tax payables Less: Ending Income Tax payables Cash payments for Income taxes $9.20 $18.00 ($17.00) $10.20 WN-4: Dividends Paid Retained earnings, Beginning balance Add: Net income for 2017 Less: Retained earnings, Ending balance Dividends Paid $52.00 $13.80 ($62.00) $3.80 WN-5 : Cash flow from sale of equipment Cost of equipment sold Less: Accumulated depreciation on equipment sold WDV of the equipment sold Less: Loss on sale of equipment Cash flow from sale of equipment $54.00 ($42.00) $12.00 ($16.00) ($4.00) WN-6: Cash paid for purchase of equipment Beginning Cost of Property, plant & equipment Less: Cost of equipment sold Balance cost of property, plant & equipment Ending Cost of Property, plant & equipment Total additions in Property, plant & equipment ($238 - $142) Less: Additions in Building in exchnage of long-term note Cash paid for purchase of equipment $196.00 ($54.00) $142.00 $238.00 $96.00 ($60.00) $36.00