Question

Using the following Balance Sheet and additional information, prepare a Statement of Cash Flows for Charlie Company for 2018 on the following page: (30 points): CHARLIE COMPANY Comparative Balance Sheet Dec 31, 2018 Dec 31, 2017 Assets Cash $ 28,000 Accounts receivable 18,000 Prepaid expenses 7,000 Inventory 25,000 Long-term investments -0- Equipment 60,000 Accumulated depreciation equipment (18.000 Total assets $120,000 1 Liabilities and Stockholders' Equity $13,000 14,000 9,000 15,000 18,000 30,000 (14,000 585,000 Accounts payable Bonds payable Common stock Retained earnings Total liabilities and stockholders' equity $ 25,000 37,000 40,000 18.000 $120,000 $ 7,000 45,000 23,000 10 000 $85,000 Additional information: 1. Net income for the year ending December 31, 2018, was $20,000 2. Cash dividends of S12,000 were declared and paid during the year. 3. Long-term investments that had a book value of $18,000 were sold for $13,000 resulting in a $5,000 loss on disposal

Answer 1

$20,000 CHARLIE COMPANY Statement of Cash Flow for the year ended 31,Dec 2018 Cash flow from operating activities Net Income Add or (subtract) items not affecting cash Increase in Accounts receivable $(4,000) Decrease in Prepaid Expenses 2,000 Increase in Inventory (10,000) Depreciation expenses 4,000 Increase in Accounts Payable 18,000 Loss on Disposal of Long term Investment 5,000 15,000 35,000 13,000 (30,000) (17,000) Net Cash Flow from Operating Activities Cash flow from Investing activities Sale of Long term Investment Purchase of Equipment Net Cash Flow from Investing activities Cash flow from Financing activities Issuance of common stock Payment of Bonds Payable Payment of Dividends Net cash used by financing activities Net increase in cash during 2018 Beginning Cash Balance Ending Cash Balance 17,000 (8,000) (12,000) (3,000) 15,000 13,000 $28,000