Question

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Golden 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.

GOLDEN CORPORATION Comparative Balance Sheets December 31, 2017 and 2016
	2017				2016
Assets
Cash	$	180,000			$	124,600
Accounts receivable		107,000				87,000
Inventory		625,000				542,000
Total current assets		912,000				753,600
Equipment		378,100				315,000
Accum. depreciation—Equipment		(166,000	)			(112,000	)
Total assets	$	1,124,100			$	956,600
Liabilities and Equity
Accounts payable	$	119,000			$	87,000
Income taxes payable		44,000				33,100
Total current liabilities		163,000				120,100
Equity
Common stock, $2 par value		624,000				584,000
Paid-in capital in excess of par value, common stock		212,000				184,000
Retained earnings		125,100				68,500
Total liabilities and equity	$	1,124,100			$	956,600

  

GOLDEN CORPORATION Income Statement For Year Ended December 31, 2017
Sales				$	1,872,000
Cost of goods sold					1,102,000
Gross profit					770,000
Operating expenses
Depreciation expense	$	54,000
Other expenses		510,000			564,000
Income before taxes					206,000
Income taxes expense					44,400
Net income				$	161,600

Additional Information on Year 2017 Transactions

1. Purchased equipment for $63,100 cash.
2. Issued 13,600 shares of common stock for $5 cash per share.
3. Declared and paid $105,000 in cash dividends.

Required:
Prepare a complete statement of cash flows; report its cash inflows and cash outflows from operating activities according to the indirect method. (Amounts to be deducted should be indicated with a minus sign.)
  

Answer 1

Solution:

Golden Corporation
Statement of Cash Flows
For the Year ended December 31, 2017
Particulars	Details	Amount
Cash Flow from Operating Activities:
Net Income		$1,61,600
Adjustments to reconcile net income to cash flow from operating activities:
Income statement items not affecting cash:
Depreciation expense	$54,000
Changes in Current assets and current liabilities:
Accounts Receivable Increase ($87000-107000)	-$20,000
Inventory Increase ($542000-$625000)	-$83,000
Accounts Payable Increase ($119000-$87000)	$32,000
Income Tax Payable increase ($44000-$33100)	$10,900
Total Adjustments		-$6,100
Net Cash provided by Operating Activities		$1,55,500
Cash Flow from Investing Activities:
Cash Paid for Equipment	-$63,100
Net Cash used in Investing Activities		-$63,100
Cash Flow from Financing Activities:
Cash Received from issue of Common Stock (13600*$5)	$68,000
Dividend Paid	-$1,05,000
Net Cash used in Financing Activities		-$37,000
Net Increase (Decrease) In Cash		$55,400
Cash balance at December 31, 2016		$1,24,600
Cash balance at December 31, 2017		$1,80,000