Question

Prepare a statement of cash flows and balance sheet

Pharoah Corporation's balance sheet at the end of 2019 included the following items. Current assets (Cash $82,000) $236,580 Land 31,610 Buildings 121,580 Equipment 91,610 Accum. depr.-buildings (31,580) Accum. depr.-equipment (11,000) Patents 41,580 Total $480,380 Current liabilities Bonds payable Common stock Retained earnings Total $151,580 101,580 181,610 45,610 $480,380 The following information is available for 2020. 1. Net income was $50,600. 2. Equipment (cost $21,580 and accumulated depreciation $9,580) was sold for $11,580. 3. Depreciation expense was $5,580 on the building and $10,580 on equipment. 4. Patent amortization was $2,500. 5. Current assets other than cash increased by $29,000. Current liabilities increased by $14,580. 6. An addition to the building was completed at a cost of $28,580. 7. A long-term investment in stock was purchased for $16,000. 8. Bonds payable of $51,610 were issued. 9. Cash dividends of $30,000 were declared and paid. 10. Treasury stock was purchased at a cost of $11,000.

Answer 1

Answer -

1. Statement of cash flows for year 2020.

Statement of Cash Flows
Cash flows from operating activities:
Net income		$50600
Adjustment to reconcile net income to net cash provided by operating activities
Depreciation expense	$16160
Patent amortization	$2500
Loss on sale of equipment	$420
Increase in current assets (other than cash)	($29000)
Increase in current liabilities	$14580
		$4660
Net cash provided by operating activities		$55260
Cash flows from investing activities:
Sale of equipment	$11580
Addition to building	($28580)
Investment in stock	($16000)
Net cash used by investing activities		($33000)
Cash flows from financing activities:
Issuance of bonds	$51610
Purchases of Treasury stock	($11000)
Payment of dividend	($30000)
Net cash provided by financing activities		$10610
Net increase in cash		$32870
Cash at beginning of period		$82000
Cash at end of period		$114870

Calculation:

a. Depreciation expenses:

= Depreciation expense on buildings + Depreciation expense on equipment

= $5580 + $10580

= $16160

b. Loss on sale of equipment:

= Cost of sold of equipment - Accumulated depreciation on sold equipment - Sale of equipment

= $21580 - $9580 - $11580

= $420

c. Net increase in cash:

= Net cash provided by operating activities - Net cash used by investing activities + Net cash provided by financing activities

= $55260 - $33000 + $10610

= $32870

d. Cash at end of period:

= Net increase in cash + Beginning cash balance

= $32870 + $82000

= $114870

2. Balance sheet at the end of 2020.

Balance Sheet
Current assets	$298450	Current liabilities	$166160
Long-term investment	$16000	Bonds payable	$153190
Land	$31610	Common stock	$170610
Buildings	$150160	Retained earnings	$66210
Equipment	$70030
Accumulated depreciation-Buildings	($37160)
Accumulated depreciation-Equipment	($12000)
Patents	$39080
Total	$556170	Total	$556170

Calculation:

a. Current assets:

1. Current assets other than cash (Beginning balance):

= Current assets (Beginning balance) - Beginning cash balance

= $236580 - $82000

= $154580

2. Current assets other than cash (Ending balance):

= Current assets other than cash (Beginning balance) + Increase in current assets other than cash

= $154580 + $29000

= $183580

Therefore,

Current assets including cash (Ending balance):

= Current assets other than cash (Ending balance) + Cash at end of period

= $183580 + $114870

= $298450

Note: Referred statement of cash flows for cash at end of period.

b. Buildings:

= Beginning balance of buildings + Addition to buildings

= $121580 + $28580

= $150160

c. Equipment:

= Beginning balance of equipment - Cost of sold of equipment

= $91610 - $21580

= $70030

d. Accumulated depreciation-Buildings:

= Beginning balance of accu. deprecation-Buildings + Depreciation expense-Buildings

= $31580 + $5580

= $37160

e. Accumulated depreciation-Equipment:

= Beginning balance of accu. deprecation-Equipment + Depreciation expense- Equipment - Accumulated depreciation on sold equipment

= $11000 + $10580 - $9580

= $12000

f. Patent:

= Beginning balance of Patent - Patent amortization

= $41580 - $2500

= $39080

g. Current liabilities:

= Beginning balance of current liabilities + Increase in current liabilities

= $151580 + $14580

= $166160

h. Bonds payable:

= Beginning balance of bands payable + Issuance of bonds payable

= $101580 + $51610

= $153190

i. Common stock:

= Beginning balance of common stock - Purchases of treasury stock

= $181610 - $11000

= $170610

j. Retained earnings:

= Beginning balance of retained earnings + Net income - Dividend paid

= $45610 + $50600 - $30000

= $66210