Question

Kay Wing, Inc., prepared the following balance sheet at December 31, 2016. Balance Sheet as of December 31, 2016 Cash Accounts receivable Inventory Long-term investments Land Plant and equipment (net) Total assets Accounts payable Taxes payable Bonds payable Capital stock Retained earnings Total liabilities and stockholders' equity $ 65,000 37,000 70,000 20,000 39,000 109,000 $340,000 $ 33,000 4,000 80,000 90,000 133,000 $340,000 The following occurred during 2017 1. $15,000 in cash and a $35,000 note payable were exchanged for land valued at $50,000. 2. Bonds payable (maturing in 2021) in the amount of $30,000 were retired by paying $28,000 cash. 3. Capital stock in the amount of $40,000 was issued at par value. 4. The company sold surplus equipment for $10,000. The equipment had a book value of $14,000 at the time of the sale. 5. Net income was $35,500. 6. Cash dividends of $5,000 were paid to the stockholders. 7. 100 shares of stock (considered short-term investments) were purchased for $8,300. 8. A new building was acquired through the issuance of $75,000 in bonds. 9. $12,000 of depreciation was recorded on the plant and equipment. 10. At December 31, 2017, Cash was $93,200, Accounts receivable had a balance of $41,500, Inventory had increased to $73,000, and Accounts payable had fallen to $25,500. Long-term investments and Taxes payable were unchanged from 2016. Required: 1. Prepare a statement of cash flows for 2017. 2. Prepare the December 31, 2017, balance sheet for Kay Wing, Inc.

Answer 1

Solution:

Balance Sheet as on December 31, 2017

Kay Wing, Inc.
Balance sheet
December 31,2017
Assets
Cash	$          93,200
Accounts receivable	$          41,500
Inventory	$          73,000
Short Term Investments	$            8,300
Long Term Investments	$          20,000
Land	$          89,000
Buildings	$          75,000
Plant and equipment	$          83,000
Total Assets	$        483,000
Liabilities and stockholder's Equity
Accounts payable	$          25,500
Taxes payable	$            4,000
Bonds payable	$        160,000
Common stock	$        130,000
Retained Earnings	$        163,500
Total liabilities and stockholder's equity	$        483,000

Notes:

1) Cash, Account receivables, Inventory, Accounts Payable are given.

2) Long term investments and taxes payable remains unchanged.

3) Retained Earnings = $ 163,500 ( Opening + Net Income - Dividend) ( $ 133000+ $35500- $5000 )

4) $40,000 common stock increased.

5) Bonds Payable = $80000-$30000+$35000+$75000 = $ 160000.

6) Land = $ 39000+$ 50000 = $ 89000

7) Plant and Equipment = $109000-$12000-$14000 = $83000