Question

A comparative balance sheet for Lomax Company containing data for the last two years is as follows: Lomax Company Comparative Balance Sheet 6.68 This Year Last Year points eBook $ 72,000 $ 50,800 592,000 612,500 609, 200 421,000 10,800 5.500 1,284,000 1,089,800 2,375,000 1,804,000 616, 200 560, 900 1,758,800 1,243, 100 82,100 133,000 121,000 70,500 $3,245,900 $2,536,400 Print References Assets Current assets: Cash and cash equivalents Accounts receivable Inventory Prepaid expenses Total current assets Property, plant, and equipment Less accumulated depreciation Net property, plant, and equipment Long-term investments Loans to subsidiaries Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Accrued liabilities Income taxes payable Total current liabilities Bonds payable Total liabilities Stockholders' equity: Cammon stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 871,600 $ 571,000 25,600 42,900 134,300 118,800 1,031,500 732,700 625,000 403,000 1,656,500 1,135,700 1,092,000 1.001.000 497.400 399.700 1,589,400 1,400, 700 $3,245,900 $2,536,400 The following additional information is available about the company's activities during this year: a. The company declared and paid a cash dividend this year. b. Bonds with a principal balance of $381,000 were repaid during this yea c. Equipment was sold during this year for $70,500. The equipment had cost $132.000 and had $41,200 in accumulated depreciation on the date of sale. d. Long-term investments were sold during the year for $112,000. These investments had cost $50,900 when purchased several years ago. e. The subsidiaries did not repay any outstanding loans during the year. f. Lomax did not repurchase any of its own stock during the year.

Answer 1

Solution

LOMAX COMPANY
Cash Flow Statement
A. Cash Flows from Operating Activity
Net Income		$ 172,100
Adjustments to reconcile net income to net cash flows from operating activities
Depreciation expense	$ 96,500
Loss on sale of Equipment	$ 20,300
Gain on sale of Investment	-$ 61,100
Change in Current operating Asset sand Liabilities
Increase in Accounts receivables	$ 20,500
Decrease in inventory	-$ 1,88,200
Increase in prepaid expense	-$ 5,300
Increase in Accounts payable	$ 300,600
Decrease in Accrues Liabilities	-$ 17,300
Increase in income tax payable	$ 15,500
		$ 181,500
Net cash flow from Operating activities		$ 353,600
B. Cash flows from Investing Activities
Sale of equipment	$ 70,500
Loan to subsidiary	-$ 50,500
Purchase of equipment	-$ 7,03,000
Sale of Investment	$ 112,000
Net cash used in Investing activities		-$ 5,71,000
C. Cash Flows from Financing activities
Proceeds from issue of Bonds	$ 603,000
Repayment of Bonds	-$ 3,81,000
Issue of common stock	$ 91,000
Payment of Dividend	-$ 74,400
Net cash used in Financing Activities		$ 238,600
Net Increase (Decrease) in Cash [A+B+C]		$ 21,200
Cash at the beginning of the period		$ 50,800
Cash at the end of the period		$ 72,000

.Working note

Calculation of dividend paid
Beginning balance of retained earnings	$ 399,700
Add: Net income	$ 172,100
	$ 571,800
Less: Ending balance of Retained earnings	$ 497,400
Dividends paid in cash	$ 74,400