Question

Carlberg Corp., a merchandiser, recently completed its 2017 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, (5) Other Expenses are all cash expenses, and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes. The company’s balance sheets and income statement follow.

CARLBERG CORPORATION Comparative Balance Sheets December 31, 2017 and 2016
	2017				2016
Assets
Cash	$	245,000			$	161,000
Accounts receivable		101,000				86,000
Inventory		613,000				536,000
Total current assets		959,000				783,000
Equipment		361,000				314,000
Accum. depreciation—Equipment		(170,000	)			(109,000	)
Total assets	$	1,150,000			$	988,000
Liabilities and Equity
Accounts payable	$	99,000			$	81,000
Income taxes payable		29,000				26,000
Total current liabilities		128,000				107,000
Equity
Common stock, $2 par value		652,000				618,000
Paid-in capital in excess of par value, common stock		224,000				173,000
Retained earnings		146,000				90,000
Total liabilities and equity	$	1,150,000			$	988,000

  

CARLBERG CORPORATION Income Statement For Year Ended December 31, 2017
Sales				$	1,979,000
Cost of goods sold					1,200,000
Gross profit					779,000
Operating expenses
Depreciation expense	$	61,000
Other expenses		546,000			607,000
Income before taxes					172,000
Income taxes expense					52,650
Net income				$	119,350

Additional Information on Year 2017 Transactions

1. Purchased equipment for $47,000 cash.
2. Issued 17,000 shares of common stock for $5 cash per share.
3. Declared and paid $63,350 in cash dividends.

Using the income statement, the comparative balance sheet, and the additional information given above, reconstruct the entries for the summarized activity of the current fiscal year. Upon completion, the trial balance tab should agree with the December 31, 2017 balances.

Reconstruct the journal entry for cash receipts from customers, incorporating the change in the related balance sheet account(s), if any.

Prepare the Statement of Cash flows for the year ended December 31, 2017 using the Direct Method.  Hint Use the Cash T-account on the General Ledger tab to identify the sources and uses of cash. List cash outflows as negative values.

UnadjustedAdjustedPost-closing

Unadjusted

Dates:

Dec 31

to:

Dec 31

	CARLBERG COMPANY Statement of Cash Flows (Direct Method) For Year Ended December 31, 2017

Prepare the operating activities section of the statement of cash flows using the indirect method.  Enter reductions to net cash provided by operating activities as negative values.

UnadjustedAdjustedPost-closing

Unadjusted

Dates:

Dec 31

to:

Dec 31

	CARLBERG COMPANY Statement of Cash Flows (Indirect Method) For Year Ended December 31, 2017

Answer 1

Adjustments Cash Flows From Operations Income Statement 39 (15,000) (77,000) 18,000 Sales 1,979,000 ncrease in Accounts Receivable 1,964,000 Cash Collected from Accounts Receivable 40 Cost of Goods Sold (1,200,000) Increase in Inventory 41 Increase in Accounts Payable (1,259,000) Cash Paid to Suppliers 42 Income Tax Expense (52,650) Increase in Income Tax Payable 119,350 Increase in Retained Earnings (546,000) (49,650) Cash paid for Income Tax 43 3,000 Net Income 63,350 Cash Paid for Dividend 44 56,000 Other expenses (546,000) Cash Paid for other expenses 45 46 Carlberg Corp. 47 Cash flow Statement 48 For the period December 31,2017 (Direct method) 49 50 Amount $ Details $ Particulars 51 Cash flows from operating Activities 52 1,964,000 Cash Collected from Accounts Receivable 53 Less Cash Paid to Suppliers Cash Paid for other expenses (1,259,000) (546,000) (49,650) 54 55 Cash paid for Income Tax expense (1,854,650) 109,350 56 Net Cash provided by Operating Activities 57 58 Cash Flows from Investing Activities Purchase of Equipment Net cash used in Investing Activities 59 (47,000) 60 (47,000) 61 62

Cash Flows from Financing Activities 63 Issue of Common Stock 85,000 (63,350) 64 Payment of Dividend Net cash provided by Financing Activities Net Increase in Cash & its equivalents Add Opening Balance of Cash Closing Balance of Cash 65 21,650 84,000 161,000 245,000 66 67 68 69 70 71 Carlberg Corp. 72 Cash flow Statement 73 (Indirect method) For the period ending December 31,2017 (In millions) Details $ 74 (In millions) Amount $ 75 Particulars 76 Cash flows from operating Activities 77 Net Income 119,350 78 Add Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 79 80 61,000 (15,000) (77,000) 18,000 81 Increase in Accounts Receivable 82 Increase in Inventory Increase in Accounts Payable Increase in Income Tax Payable Net Cash provided by Operating Activities 83 84 (10,000) 109,350 85 3,000 86

Cash Flows from Investing Activities Purchase of Equipment Net cash used in Investing Activities 88 (47,000) 89 (47,000) 90 91 Cash Flows from Financing Activities 92 Issue of Common Stock 85,000 (63,350) 93 Payment of Dividend Net cash provided by Financing Activities Net Increase in Cash & its equivalents Add Opening Balance of Cash Closing Balance of Cash 94 21,650 84,000 161,000 245,000 95 96 97 98 99 100 101