Question

*Problem 23-2 The comparative balance sheets for Sarasota Corporation show the following information. December 31 2017 2016 Cash $33,500 $12,900 Accounts receivable 12,100 10,000 Inventory 11,900 8,900 Available-for-sale debt investments –0– 3,100 Buildings –0– 29,800 Equipment 44,900 19,900 Patents 4,900 6,200 $107,300 $90,800 Allowance for doubtful accounts $3,000 $4,600 Accumulated depreciation—equipment 2,000 4,600 Accumulated depreciation—building –0– 6,100 Accounts payable 4,900 3,100 Dividends payable –0– 5,000 Notes payable, short-term (nontrade) 3,000 3,900 Long-term notes payable 31,000 25,000 Common stock 43,000 33,000 Retained earnings 20,400 5,500 $107,300 $90,800 Additional data related to 2017 are as follows. 1. Equipment that had cost $11,200 and was 40% depreciated at time of disposal was sold for $2,500. 2. $10,000 of the long-term note payable was paid by issuing common stock. 3. Cash dividends paid were $5,000. 4. On January 1, 2017, the building was completely destroyed by a flood. Insurance proceeds on the building were $30,200 (net of $2,100 taxes). 5. Investments (available-for-sale) were sold at $1,700 above their cost. The company has made similar sales and investments in the past. 6. Cash was paid for the acquisition of equipment. 7. A long-term note for $16,000 was issued for the acquisition of equipment. 8. Interest of $2,100 and income taxes of $6,600 were paid in cash. Prepare a statement of cash flows using the indirect method. Flood damage is unusual and infrequent in that part of the country. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).) SARASOTA CORPORATION Statement of Cash Flows For the Year Ended Dece Cash Flows from Operat Net Income Adjustments to reconcile net income to Gain from Flood Damag Depreciation Expense Patent Amortization Loss on Sale of Equipme Gain on Sale of Investm Increase in Accounts Re Increase in Inventory Increase in Accounts Pai

Answer 1

SARASOTA CORPORATION
Statement of Cash flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net Income		$   14,900	20400-5500
Adjustments to reconcile net income to ;
Net cash provided by operating activities
Depreciation expense	$       1,880		2000-4600+(11200*40%)
Patent amortization	$       1,300
Loss on sale equipment	$       4,220		(11200*60%)-2500
Gain from flood damage	$    (8,600)		29800-6100-30200-2100
Gain on sale of investment	$    (1,700)
Increase in accounts receivable	$    (3,700)		10000-12100+3000-4600
Increase in inventory	$    (3,000)
Increase in accounts payable	$       1,800
		$   (7,800)
Net cash provided by operating activities		$     7,100
Cash flows from investing activities
Sale of investment	$       4,800		3100+1700
Proceeds from Flood damage of building	$    32,300		30200+2100
Sale of equipment	$       2,500
Purchase of equipment	$ (20,200)		19900-44900-11200+16000
Net cash used by investing activities		$   19,400
Cash flows from financing activities
Payment of short term note payable	$        (900)
Payment of dividends	$    (5,000)
Net cash provided by financing activities		$   (5,900)
Net Increase in cash		$   20,600
Cash and cash equivalents at beginning of period		$   12,900
Cash and cash equivalents at end of period		$   33,500
Supplimental disclosure of cash flow information
Cash paid during the year for interest		$     2,100
Cash paid during the year for income tax		$     6,600
Non cash financing and investing activities
Long term note payable was paid by issuing common stock		$   10,000
Equipment acquired by issuing long term note		$   16,000

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