Question

The comparative balance sheet of Canace Products Inc. for December 31, 20Y6 and 20Y5, is as follows:

		Dec. 31, 20Y6		Dec. 31, 20Y5
Assets
Cash		$227,220		$211,610
Accounts receivable (net)		82,310		76,000
Inventories		232,380		225,030
Investments		0		87,180
Land		119,180		0
Equipment		256,370		198,950
Accumulated depreciation-equipment		(60,020)		(53,650)
	Total assets	$857,440		$745,120
Liabilities and Stockholders' Equity
Accounts payable		$155,200		$146,790
Accrued expenses payable		15,430		19,370
Dividends payable		8,570		6,710
Common stock, $10 par		46,300		36,510
Paid-in capital: Excess of issue price over par-common stock		174,060		101,340
Retained earnings		457,880		434,400
	Total liabilities and stockholders’ equity	$857,440		$745,120

The income statement for the year ended December 31, 20Y6, is as follows:

Sales					$1,293,280
Cost of merchandise sold					532,500
Gross profit					$760,780
Operating expenses:
	Depreciation expense		$6,370
	Other operating expenses		671,630
		Total operating expenses			678,000
Operating income					$82,780
Other expense:
		Loss on sale of investments			(23,540)
Income before income tax					$59,240
Income tax expense					18,960
Net income					$40,280

Additional data obtained from an examination of the accounts in the ledger for 20Y6 are as follows:

1. Equipment and land were acquired for cash.
2. There were no disposals of equipment during the year.
3. The investments were sold for $63,640 cash.
4. The common stock was issued for cash.
5. There was a $16,800 debit to Retained Earnings for cash dividends declared.

Required:

Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.

Canace Products Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y6
Cash flows from operating activities:
Cash received from customers	$
Cash payments for merchandise
Cash payments for operating expenses
Cash payments for income taxes
Net cash flow from operating activities		$
Cash flows from (used for) investing activities:
Cash from sale of investments	$
Cash used for purchase of land
Cash used for purchase of equipment
Net cash flow used for investing activities
Cash flows from (used for) financing activities:
Cash from sale of common stock	$
Cash used for dividends
Net cash flow from financing activities
Increase in cash		$
Cash at the beginning of the year
Cash at the end of the year		$

Answer 1

Canace Products Inc. Statement of Cash Flows For the Year Ended December 31, 20Y6 Cash flows from operating activities: Cash received from customers Cash payments for merchandise Cash payments for operating expenses Cash payments for income taxes Net cash flow from operating activities Cash flows from (used for) investing activities: |Cash from sale of investments |Cash used for purchase of land Cash used for purchase of equipment Net cash flow used for investing activities Cash flows from (used for) financing activities: $1,286,970 $ (531,440) S (675,570) $ (18,960) $ 61,000 $ 63,640 $ (119,180)| $ (57,420) S(112,960) $ 82,510 $ (14,940) Cash from sale of common stock Cash used for dividends Net cash flow from financing activities Increase in cash Cash at the beginning of the year Cash at the end of the year $ 67,570 $ 15,610 211610 $ 227,220

Working Notes 1 Cash received from customers Opening balance of Accounts Receivables 76,000 S 1,293,280 Add: Sales Less: Closing balance of accounts receivables (82,310) $ 1,286,970 2 Cash paid to Mechandise Cost of Mechandise sold 532,500 Add: Closing Balance of Inventory 232,380 764,880 Less: Opening balance of inventory (225,030) 539,850 Purchases Add: Opening balance of Accounts Payable Less : Closing Balance of Accounts payable 146,790 (155,200) 531,440 3 Operating expenses paid in Cash 19,370 Accrued expenses payable - beginning balance Add: Operating expenses as per income statement 671,630 691,000 Less : Accrued expenses payable - Ending balance Other expenses paid in cash (15,430) 675,570

4) Income tax paid in cash Beginning balance of income tax payable Add: Current year income tax expense Less : Ending balance of Income tax payable Income tax paid in cash 18,960 18,960 5) Cash received on sale of investment Cost of the investment sold Less : Loss on asle of investment Cash received on sale of investment 87,180 (23,540) 63,640 6) Cash paid for the purchase of Land Land - Ending balance Less : Land - Beginning balance Cash paid for the purchase of Land 119,180 119,180

7) Cash paid for purchase of Equipment Equipment - Ending balance Less : Equipment - Beginning balance Cash paid for purchase of Equipment 256,370 (198,950) 57,420 8) Cash from issue of Common Stock Common Stock , Par - Ending balance Add: Additional paid in capital , in excess of par Common 46,300 Stock - Ending balance Less :Common Stock , Par - Begnning balance Less : Additional paid in capital , in excess of par Common 174,060 (36,510) (101,340) Stock - Beginning balance Cash from issue of Common Stock 82,510 9) Cash used for payment of Dividends Dividends payable - Beginning balance Add: Current year dividend Less : Dividends payable - Ending Balance Cash used for payment of Dividends 6,710 16,800 (8,570) 14,940 %24