Question

Stockholders' Equity Common stock, $4 par $100,000 287,500 x 280,000 x Paid-in capital in excess of par 280,000 1,200,370 Retained earnings Total stockholders' equity 1,290,910 $1,858,410 2,356,500 $ $ 1,580,370 2,045,000 Total liabilities and stockholders' equity

Championship Boxing, Inc. Statement of Cash Flows For the Year Ended December 31, 20Y8
Cash flows from (used for) operating activities:
Net income	$186,540
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation	18,400
Gain on sale of investments	(50,000)
Changes in current operating assets and liabilities:
Increase in accounts receivable	(25,410)
Increase in inventories	(33,450)
Increase in accounts payable	41,130
Decrease in accrued expenses payable	(12,470)
Net cash flow from operating activities			$124,740
Cash flows from (used for) investing activities:
Cash received from sale of investments	$280,000
Cash paid for purchase of land	(326,000)
Cash paid for purchase of equipment	(151,920)
Net cash flow used for investing activities			(197,920)
Cash flows from (used for) financing activities:
Cash received from sale of common stock	$187,500
Cash paid for dividends	(91,200)
Net cash flow from financing activities			96,300
Net increase in cash			$23,120
Cash balance, January 1, 20Y8			585,920
Cash balance, December 31, 20Y8			$609,040

Balance Sheet

Using the information on above, complete the following comparative balance sheet.

Championship Boxing, Inc. Comparative Balance Sheet December 31, 20Y8 and 20Y7
	20Y8			20Y7
Assets
Cash		$			$585,920
Accounts receivable (net)		230,970
Inventories					618,320
Investments		0
Land					0
Equipment		705,120
Accumulated depreciation-equipment		(166,400)
Total assets		$			$
Liabilities
Accounts payable (merchandise creditors)		$			$391,800
Accrued expenses payable (operating expenses)		41,160
Dividends payable					19,200
Total liabilities		$498,090			$
Stockholders' Equity
Common stock, $4 par		$			$100,000
Paid-in capital in excess of par					280,000
Retained earnings
Total stockholders' equity		$1,858,410			$
Total liabilities and stockholders' equity		$			$

Answer 1

The comparative balance sheet is shown as follows:- (Amounts in $)

Championship Boxing, Inc. Comparative Balance Sheet December 31, 20Y8 and 20Y7
	20Y8			20Y7
Assets
Cash		609,040 (a)			$585,920
Accounts receivable (net)		230,970			205,560 (b)
Inventories		651,770 (c)			618,320
Investments		0			230,000 (d)
Land		326,000 (e)			0
Equipment		705,120			553,200 (f)
Accumulated depreciation-equipment		(166,400)			(148,000) (g)
Total assets		2,356,500			2,045,000
Liabilities
Accounts payable (merchandise creditors)		432,930 (h)			$391,800
Accrued expenses payable (operating expenses)		41,160			53,630 (i)
Dividends payable		24,000 (bal fig)			19,200
Total liabilities		498,090			464,630 (i)
Stockholders' Equity
Common stock, $4 par [(25,000+12,500)*4]		150,000			100,000
Paid-in capital in excess of par [280,000+(187,500-50,000)]		417,500			280,000
Retained earnings		1,290,910 (k)			1,200,370 (j)
Total stockholders' equity		$1,858,410			1,580,370 (j)
Total liabilities and stockholders' equity (j)		2,356,500			2,045,000

Notes showing explanations to above points:-

a) The cash balance on Dec 31, 20Y8 is given in the cash flow statement (i.e. $609,040).

b) There is an increase in accounts receivable of $25,410, therefore accounts receivable on Dec 31, 20Y7 is $205,560 (230,970-25,410).

c) There is an increase in inventories of $33,450, therefore inventories on Dec 31, 20Y8 is $651,770 ($618,320+$33,450).

d) The book value of investments on Dec 31, 20Y8 = Sale value - Gain on sale

= $280,000 - $50,000 = $230,000

e) Cash paid for purchase of land would be equal to balance of land on Dec 31, 20Y8. (i.e. $326,000).

f) The cost of equipment purchased during the year 20Y8 is $151,920. Therefore balance of equipment as on Dec 31, 20Y7 is $553,200 ($705,120-$151,920).

g) Depreciation for the year 20Y8 is $18,400 which is deducted from accumulated depreciation balance on Dec 31, 20Y8 for calculating accumulated depreciation balance on Dec 31, 20Y7. (i.e. $166,400-18,400 = $148,000).

h) Accounts payable bal on Dec 31, 20Y8 = $391,800+$41,130 = $432,930

i) Accrued expenses payable balance on Dec 31, 20Y7 = $41,160+$12,470 = $53,630

Total liabilities for year ending Dec 31, 20Y8 is equal to sum of accounts payable, accrued expenses payable and dividends payable.

j) Total liabilities and stockholders equity would be equal to total assets for both years. Total stockholders' equity as on Dec 31, 20Y7 is equal to total liabilities and stockholder's equity minus total liabilities.

Total retained earnings on Dec 31, 20Y7 = $1,580,370 - $280,000 - $100,000

= $1,200,370

k) Retained earnings on Dec 31, 20Y7 = $1,858,410 - ($280,000+$100,000+$187,500 new total issue)

= $1,290,910

l) For calculating common stock and paid in capital in excess of par no. of shares issued during the year is needed which is not given in the question and 12,500 shares is found out from the statement of question similar to this available to me.

Shares outstanding at the beginning of 20Y8 = $100,000/$4 par = 25,000

Par value of common stock issued = 12,500 shares*$4 par = $50,000