Question

Instructions: Please prepare a proper Statement of Cash Flows for Reynolds Company using the Indirect Method in either Word or Excel. Handwritten copies will not be accepted! This assignment can be completed in teams of two. Please submit one copy per team and include names on the submission. The balance sheets for Reynolds Company for the years ended December 31, 2019 and 2018, are as follows: 2019 2018 Cash $53,000 $50,000 Accounts receivable (net) 37,000 48,000 Inventories 108,500 100,000 Investments 0 70,000 Equipment 573,200 450,000 Accumulated depreciation equipment (142.000) (176,000) $629.700 $542.000 $62,500 $43,800 Accounts payable Bonds payable, due Year 2 Common stock, $10 par Paid-in capital in excess of par common stock Retained earnings 325,000 80,000 162 200 $629,700 100,000 285,000 55,000 58,200 $542.000 349,000 The income statement for 2019 is as follows: Sales $625,700 Cost of merchandise sold Gross profit $285,700 Operating expenses: Depreciation expense $26,000 Other operating expenses 68,000 94,000 Income from operations $191,700 Other income: Gain on sale of investment $4,000 Other expense: Interest expense 6.000 2.000) Income before income tax $189,700 Income tax Net income $129,000 Additional information: a. Fully depreciated equipment costing $60,000 was scrapped with no salvage, and equipment purchased for $183,200. b. Bonds payable for $100,000 were retired by payment at their face amount C. 5,000 shares of common stock were issued at $13 for cash d. Cash dividends of $25,000 were declared and paid. 60 700

Answer 1

		CASH FLOW FROM OPERATING ACTIVITIES
	a	Net Income for 2019	$129,000
		Adjustment to reconcile net income
		to net cash provided by operating activities
	b	Depreciation expense	$26,000
		Gain on Sale of investment	-$4,000
		(Increase)/Decrease in current assets
	c	Decrease in Accounts Receivable	$11,000	(48000-37000)
	d	Increase in Inventory	-$8,500	(108500-100000)
		Increase/(Decrease) in current liabilities
	e	Increase in Accounts Payable	$18,700	(62500-43800)
	g=a+b+c+d+e	NET CASH PROVIDED BY OPERATING ACTIVITIES	$172,200
		CASH FLOW FROM INVESTING ACTIVITIES
		Investment in Plant and Equipment	-$183,200
	h	NET CASH USED IN INVESTING ACTIVITIES	-$183,200
		CASH FLOW FROM FINANCING ACTIVITIES
		Cash flow from Investments	$74,000
		Cash flow from Bond Payable	-$100,000
		Cash flow from common stock	$65,000	(13*5000)
		Dividend Cash Flow	-$25,000
	j	NET CASH PROVIDED BY FINANCING ACTIVITIES	$14,000
	K=g+h+j	NET INCREASE/(DECREASE) IN CASH	$3,000
		Cash in the beginning of 2019	$50,000
		Cash at the end of 2019	$53,000