Question

II. Statement of Cash Flows (25 points) The following is Grahon Corporation's comparative balance sheets for 2018 and 2017 Cash Accounts receivable Inventories Property, plant, and equipment Accumulated depreciation Investment in Elkins Corporation Loan receivable Total assets December 31, 2018 400,000 564,000 925,000 1,653,500 (582,500) 152,500 135.000 3.247.500 2017 350,000 584,000 857.500 1.483,500 (520,000) 137,500 $ 2.892,500 5 477,500 25,000 45,000 Accounts payable Income taxes payable Dividends payable Capital lease obligation Capital stock, common, Si par Additional paid-in capital Retained earnings Total liabilities and stockholders' equity 507,500 15,000 40,000 200,000 250,000 750,000 1,485.000 250,000 750,000 1,345,000 $ 3.247.500 2.892.500 Additional information: On December 31, 2017, Grafton acquired 25 percent of Elkins Corporation's common stock for $137,500. On that date, the carrying value of Elkins' net assets and liabilities (which approximated fair value) was $550,000 Elkins reported income of $60,000 for the year ended December 31, 2018. No dividend was paid on Elkins common stock during the year. During 2018, Grafton loaned $150,000 to Beckley Company, an unrelated entity Beckley made the first semi-annual principal payment of $15.000. plus interest at 10 percent, on October 1, 2018. On January 2, 2018, Grafton sold equipment costing $30,000, with a carrying value of $17,500, for $20,000 cash. On January 2, 2018, Grafton entered into a capital lease for an office building. The present value of the annual rental payments is $200,000, which equals the fair value of the building, Grafton made the first lease payment of $30,000 when due on January 2, 2019. 5. Grafton's net income for 2014 was $180,000. 6. Grafton declared and paid cash dividends for 2018 and 2017 as follows: Declared Paid Amount 2018 Dec. 15, 2018 Feb. 28, 2019 $ 40,000 2017 Dec. 15, 2017 Feb. 28, 2018 $ 45,000

the year date is 2018.

Answer 1

Cash flow statement of Grafton Corporation for the year ended 31 December 2018 using indirect method
Particulars	Amount in $
Cash flow from operating activities
Net income	1,80,000
Add : Depreciation	75,000
Less : Profit on sale of assets	-2,500
Less : Income from investment in equity	-15,000
(Increase) / decrease in current assets
Account receivable	20,000
Inventory	-67,500
Increase / (decrease) in current liabilities
Account payable	30,000
Taxes paid	-10,000
Net cash from by operating activities (A)	2,10,000
Cash flow from investment activities
Purchase of property, plant and equipment	-2,00,000
Dividend paid pertaining to 2017	-45,000
Proceed from sale of equipment	20,000
Net cash used by investing activities (B)	-2,25,000
Cash flow from financing activities
Loan given	-1,50,000
Loan received	15,000
Capital lease obligation	2,00,000
Net cash from by financing activities (C )	65,000
Net increase / (Decrease) in cash (D=A+B+C)	50,000
Beginning cash balance (E )	3,50,000
Ending cash balance (F=D+E)	4,00,000
Working note
Purchase of property, plant and equipment
Opening PPE cost (P)	14,83,500
Less : Equipment sold (Q)	-30,000
PPE cost after equipment sold (R=P+Q)	14,53,500
Closing PPE cost (S)	16,53,500
Difference is on account of new purchase (T=S-R)	2,00,000
Depreciation working
Opening accumulated depreciation (H)	5,20,000
Less : Accumulated depreciation on equipment sold (I )	-12,500
Accumulated depreciation after sale of equipment (J=H-I)	5,07,500
Closing accumulated depreciation (K)	5,82,500
Depreciation for the year (K-J)	75,000