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22. EXTRA CREDIT (OPTIONAL - CARRYOVER 25 POINTS) The comparative balance sheet of Colson Company, for 2011 and the preceding year ended December 31. 2010 appears below in condensed form: Year 2011 Year 2010 Cash Accounts receivable (net) Inventories Investments Equipment Accumulated depreciation equipment $ 45,000 51,300 147,200 493,000 (113,700) 5622.800 $ 61,500 $ 53,500 58,000 135,000 60,000 375,000 (128.000) $553.500 $ 42,600 100,000 200,000 Accounts payable Bonds payable, due 2014 Common stock, S10 par Paid-in capital in excess of par- common stock Retained earnings 250,000 75,000 236,300 $622.800 50,000 160.900 $553.500 The income statement for the current year is as follows: $623,000 348.500 $274,500 $24,700 75,300 Sales Cost of merchandise sold Gross profit Operating expenses: Depreciation expense Other operating expenses Income from operations Other income: Gain on sale of investment Other expense: Interest expense Income before income tax Income tax Net income 100.000 $174,500 $ 5,000 12.000 (7.000) $167,500 64.100 S103.400 Additional data for the current year are as follows: (a) (b) (c) (d) (e) Fully depreciated equipment costing $39,000 was scrapped, no salvage, and equipment was purchased for $157,000. Bonds payable for $100,000 were retired by payment at their face amount. 5,000 shares of common stock were issued at $15 for cash. Cash dividends declared were paid $28,000. All sales are on account. Prepare a statement of cash flows, using the direct method.

Answer 1

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Colson Company	Amount $		Colson Company
Cash Received from sale			Cash Flow Direct Method	Amount $	Amount $
Opening Accounts Receivable	58,000.00		Cash Receipts from
Add: Sales	623,000.00		Cash Received from sale	629,700.00		See A
Less: Closing Accounts Receivable	51,300.00		Total cash inflows		629,700.00
Cash Received from sale	629,700.00	A	Cash paid for Inventory purchased	341,800.00		See C
			Cash paid for Operating Expense	75,300.00		See D
Merchadise purchased			Interest paid	12,000.00
Cost of merchadise sold	348,500.00		Income Tax paid	64,100.00
Add: Closing Inventory	147,200.00		Total cash outflows		493,200.00
Less: Opening Inventory	135,000.00		Net Cash inflow from operating activities		136,500.00	J
Inventory purchased	360,700.00	B
			Cash Flow from Investing Activities
Cash paid for Merchadise purchased			Equipment purchased	(157,000.00)
Opening Accounts Payable	42,600.00		Cash receieved on sale of Investment	65,000.00		See D
Add: Purchases	360,700.00	See B	Net Cash inflow from Investing Activities		(92,000.00)	K
Less: Closing Accounts Payable	61,500.00
Cash paid for Inventory purchased	341,800.00	C	Cash Flow from Financing Activities
			Bonds Payable retired	(100,000.00)
Investment sold			Common stock issued during the year	75,000.00		See G
Book Value	60,000.00		Dividends paid	(28,000.00)
Add: Gain on sale	5,000.00		Net Cash inflow form Financing Activities		(53,000.00)	L
Cash receieved on sale of Investment	65,000.00	D
			Net Increase in cash		(8,500.00)	M=J+K+L
Common stock issued during the year			Add: Beginning Cash Balance		53,500.00	N
Number of shares	5,000.00	E	Ending cash Balance		45,000.00	O=M+N
Price per share	15.00	F
Common stock issued during the year	75,000.00	G=E*F