Question

Exercise 23-11

Condensed financial data of Crane Company for 2017 and 2016 are presented below.

CRANE COMPANY COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2017 AND 2016
		2017			2016
Cash		$1,760			$1,180
Receivables		1,780			1,280
Inventory		1,610			1,920
Plant assets		1,880			1,660
Accumulated depreciation		(1,220	)		(1,190	)
Long-term investments (held-to-maturity)		1,310			1,400
		$7,120			$6,250
Accounts payable		$1,170			$880
Accrued liabilities		190			240
Bonds payable		1,390			1,540
Common stock		1,910			1,730
Retained earnings		2,460			1,860
		$7,120			$6,250

CRANE COMPANY INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017
Sales revenue		$7,020
Cost of goods sold		4,780
Gross margin		2,240
Selling and administrative expenses		910
Income from operations		1,330
Other revenues and gains
Gain on sale of investments		70
Income before tax		1,400
Income tax expense		540
Net income		860
Cash dividends		260
Income retained in business		$600

Additional information:

During the year, $80 of common stock was issued in exchange for plant assets. No plant assets were sold in 2017.

Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1

$ 860 -70 CRANE COMPANY Statement of Cash Flows For the Year Ended December 31, 2017 Cash flows from Operating Activities Net Income Adjustments to reconcile net income to net cash flow from operating activities: Depreciation expense Gain on sale of investments Increase in receivables Decrease in inventory Increase in accounts payable Decrease in accrued liabilities Net cash flow from Operating Activities Cash flows from Investing Activities Proceed from sale of investments Payment for purchase of plant assets Net cash flow from Investing activities Cash flows from Financing Activities Issuance of common stock Repayment of bonds Payment for cash dividend Net Cash used for Financing Activities Net change in cash Beginning cash balance Ending cash balance -500 310 290 -50 $ $ 10 870 -140 $ 20 100 -260 $ $ $ -310 580 1,180 1,760

Proceed from sale of investment = Cost of investment sold + Gain on sale of investment
Proceed from sale of investment = $90 + $70
Proceed from sale of investment = $160

Cash paid for purchase of plant assets = Cost of plant assets purchased - Exchange of common stock for plant assets
Cash paid for purchase of plant assets = $220 - $80
Cash paid for purchase of plant assets = $140

Cash proceed from issue of common stock = Issuance of common stock - Exchange of common stock for plant assets
Cash proceed from issue of common stock = $180 - $80
Cash proceed from issue of common stock = $100

Dividend = Beginning retained earnings + Net income - Ending retained earnings
Dividend = $1,860 + $860 - $2,460
Dividend = $260