Question

3. (40 points) Statement of Cash Flows Worksheet Uthah Company is a merchandising corporation. Recently it completed its 2018 calendar year operations. Assume that (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, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company's balance sheets and income statement follow, as does some additional information. Uthah Company Comparative Balance Sheet December 31, 2018 and 2017 Uthah Company Income Statement For the Year Ended December 31, 2018 Assets Sales $1,185,000 Cash $123,450 $61,550 Cost of goods sold 595,000 Accounts receivable 77,100 80,750 Gross profit 590,000 Inventory 240,600 250,700 Operating expenses: Prepaid expenses 15,100 17,000 Depreciation expense $38,600 Total current assets 456,250 410,000 Other expenses 362 850 Equipment 262,250 200,000 Total operating expenses 401,450 Accum Dep'n-Equipment (110,750) (95,000) Operating income before taxes 188,550 Total assets $607,750 $515,000 Other gains (losses): Loss on sale of equipment 2.100) Liabilities and Equity Income before taxes 186,450 Income taxes 28,350 Accounts payable $17.750 $102,000 Short-term notes payable 15,000 10,000 Net Income $158,100 Total current liabilities 32,750 112,000 Long-term notes payable 100,000 77,500 Additional information about 2018: Total liabilities 132,750 189,500 a) The equipment originally cost $51,000, with accumulated depreciation of $22,850, for $26,050. b) Purchased equipment costing $113,250 by paying $43,250 cash Equity and signing a long-term note payable for the balance. Common stock, $5 par 215,000 200,000 c) Borrowed $5,000 cash by signing a short-term note payable. Paid-in capital in excess of par 30,000 d) Paid $47,500 cash to reduce the long-term note payable. e) Issued 3,000 shares of common stock for $15 cash per share. Retained earnings 230,000 125,500 1) Declared and paid cash dividends of $53,600. Total liabilities and Equity $607,750 $515,000 On the next page, complete the worksheet for the statement of cash flows. Notice you'll need to put in the row labels and data yourself. Then show any computations needed to support your worksheet computations below. Use little circled #s to show which transactions go together on the worksheet. Finally, use your worksheet to complete the boxes below. Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Total change in cash in 2018 Beginning cash balance Ending cash balance 3

Answer 1

Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Total change in cash in 2018 Beginning cash balance Ending cash balance $130,200 -$17,200 -$51,100 $61,900 $61,550 $123,450 Worksheet: Uthah Company Statement of Cash Flows (Indirect Method) For the Year Ended December 31, 2018 Cash Flow from Operating Activities: Net Income Adjustments to reconcile net income to net cash provided by operating activities: $158,100 [Ref: Income Statement]

Depreciation expense Loss on sale of equipment Accounts receivable decreased Inventory decreased Inventory decreased Accounts payable decreased Total Adjustments Net cash flow from operating activities $38,600 $2,100 $3,650 $10,100 $1,900 $84,250 [Non-cash expense and so added back] [Non-cash expense and so added back] [$80750 - $77100 --> It would decrease working capital requirement & so positive] [$240600 - $250700 --> It would decrease working capital requirement & so positive] ($15100 - $17000 --> It would decrease working capital requirement & so positive] ($102000 - $17750 --> It would increase working capital requirement & so negative) $ 27,900 $130,200 Cash Flow from Investing Activities: Cash received from selling equipment Cash paid to purchase new equipment Net cash flow from investing activities $26,050 $43,250 $17,200 [3,000 shares x $15] Cash Flow from Financing Activities: Cash realized from signing short-term note payable Cash realized from issuing common stock Cash used to retire long-term note payable Cash dividends declared & paid Net cash flow from financing activities Net increase in cash balance during the year Add: Cash, Beginning balance Cash, Ending balance $5,000 $45,000 -$47,500 -$53,600 $51,100 $61,900 $61,550 $123,450 Non-Cash Investing and Financing Activities: Equipment purchased by signing note payable $70,000 ($113,250 - $43,250]