Question

Following are a statement of cash flows (indirect method) for Harris, Inc., for the year ended December 31, 2017, and the firm’s balance sheet at December 31, 2016:

HARRIS, INC.
Statement of Cash Flows
For the year Ended December 31, 2017
Cash Flows from Operating Activities:
Net income	$	13,600
Add (deduct) items not affecting cash:
Depreciation expense		32,000
Increase in accounts receivable		(7,000	)
Decrease in merchandise inventory		32,800
Increase in accounts payable		4,900
Net cash provided by operating activities	$	76,300
Cash Flows from Investing Activities
Purchase of buildings		(91,400	)
Proceeds from sale of land at its cost		8,300
Net cash used by investing activities	$	(83,100	)
Cash Flows from Financing Activities:
Payment of short-term debt		(4,900	)
Payment of notes payable		(10,600	)
Proceeds from issuance of long-term debt		16,400
Proceeds from issuance of common stock		8,900
Payment of cash dividends on common stock		(5,700	)
Net cash provided by financing activities	$	4,100
Net decrease in cash for the year	$	(2,700	)

HARRIS, INC.
Balance Sheet
At December 31, 2016
Assets
Cash	$	17,800
Accounts receivable		61,800
Merchandise inventory		76,800
Total current assets	$	156,400
Land		34,700
Buildings		119,600
Less: Accumulated depreciation		(72,100	)
Total land and buildings	$	82,200
Total assets	$	238,600
Liabilities
Accounts payable	$	59,600
Short-term debt		17,900
Notes payable		35,600
Total current liabilities	$	113,100
Long-term debt		51,200
Stockholders' Equity
Common stock, no par	$	20,600
Retained earnings		53,700
Total Stockholders' Equity	$	74,300
Total liabilities and Stockholders' Equity	$	238,600

Required:

a. Using the preceding information, complete the balance sheet for Harris, Inc., at December 31, 2017.

HARRIS, INC Balance Sheet At December 31, 2017 Assets: Current assets: Cash Accounts receivable Merchandise inventory Total current assets Noncurrent assets Land Buildings Less: Accumulated depreciation Total noncurrent assets Total assets Liabilities and Stockholders' Equity: Current liabilities Accounts payable Short-term debt Notes payable Total current liabilities Long-term debt Stockholders' Equity: Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity

b. Complete the statement of changes in retained earnings for the year ended December 31, 2017. (Amounts to be deducted should be

Answer 1

In above type of questions, we calculate 2017 by adjusting 2016 figures by adding or subtracting cash flow figures, as follows:

For assets - If cash flow states increase (i.e negative figure) then we add to 2016 figures. If cash flow states decrease (i.e positive figure) the we will subtract from 2016 figures

For liabilities - If cash flow states increase (i.e positive figure) the we add to 2016 figures. If cash flow states decrease (i.e negative figure) then we will subtract from 2016 figures.

For example - For accounts receivable in above question following information has been provided:

- 2016 figure is $ 61,800

- In cash flow stated that accounts receivable has increased by $ 7,000

So 2017 accounts receivable figure = $ 61,800 + $ 7,000 = $ 68,800

Ans 1)

Harris Inc
Balance Sheet
At December 31, 2017
Figures in $			Explanation
Current Assets
Cash	15,100.00		= (17,800 (2016 figure) - 2,700 (as stated in cash flow that cash has decreased in 2017)
Accounts Receivable	68,800.00		= (61,800 (2016 figure) + 7,000 (as stated in cash flow that accounts receivable has increased in 2017)
Merchandise Inventory	44,000.00		= (76,800 (2016 figure) - 32,800 (as stated in cash flow that inventory has decreased in 2017)
Total Current Assets		1,27,900.00
Non Current Assets
Land	26,400.00		= (34,700 (2016 figure) - 8,300 (as stated in cash flow that sale of land at cost. Hence we will decrease value of land by sales proceeds, in 2017)
Building	2,11,000.00		= (119,600 (2016 figure) + 91,400 (as stated in cash flow that building was purchased in 2017. So we will increase the value of building by purchase, in 2017)
Less: Accumulated Depreciation	-1,04,100.00		= (72,100 (2016 figure) + 32,000 (as stated in cash flow that depreciation figure is 32,000 in 2017, under adjustmets in cash flow)
Total Non Current Assets		1,33,300.00
Total Assets		2,61,200.00
Liabilities and Stockholders Equity
Current Liabilities
Accounts payable	64,500.00		= (59,600 (2016 figure) + 4,900 (as stated in cash flow that accounts payable has increased in 2017)
Short-term debt	13,000.00		= (17,900 (2016 figure) - 4,900 (as stated in cash flow that short debt has decreased in 2017 due to payment)
Notes payable	25,000.00		= (35,600 (2016 figure) - 10,600 (as stated in cash flow that notes payable has decreased in 2017 due to payment)
Total Current Liabilities		1,02,500.00
Non Current Liabilities
Long term debt	67,600.00	67,600.00	= (51,200 (2016 figure) + 16,400 (as stated in cash flow that long term debt has increased in 2017 due to issuance)
Stockerholders Equity
Common stock	29,500.00		= (20,600 (2016 figure) + 8,900 (as stated in cash flow that in 2017 common stocks were issued)
Reatined earnings	61,600.00		Please check below statement of changes in retained earings
Total Stockerholders Equity		91,100.00
Total Liabilities and stockholders equity		2,61,200.00

In above balance sheet, yellow highlighted rows have same figure i.e $ 261,200, which means that assets and liabilities & equity of balance sheet has tallied.

Ans 2)

Harris Inc
Statement of Changes in Retained Earnings
For the Year Ended December 31, 2017
Figures in $		Explanation
Retained earning Jan 1, 2017	53,700.00
Net income of 2017	13,600.00	I got figure from Cash flow under 'Net Income'
Dividends paid	-5,700.00	I got figure from Cash flow under 'Dividend paid'
Retained earning Dec 31, 2017	61,600.00

Hope above explanation has helped you!