Question

The comparative balance sheet of Cromme Inc. for December 31, 2016 and 2015, is shown as follows:

1		Dec. 31, 2016	Dec. 31, 2015
2	Assets
3	Cash	$625,680.00	$586,230.00
4	Accounts receivable (net)	228,100.00	208,850.00
5	Inventories	640,910.00	617,650.00
6	Investments	0.00	240,620.00
7	Land	328,090.00	0.00
8	Equipment	704,540.00	553,320.00
9	Accumulated depreciation-equipment	(166,310.00)	(147,840.00)
10	Total assets	$2,361,010.00	$2,058,830.00
11	Liabilities and Stockholders’ Equity
12	Accounts payable (merchandise creditors)	$425,280.00	$404,550.00
13	Accrued expenses payable (operating expenses)	41,990.00	52,020.00
14	Dividends payable	24,190.00	20,170.00
15	Common stock, $4 par	142,000.00	106,000.00
16	Paid-in capital: Excess of issue price over par—common stock	416,700.00	279,900.00
17	Retained earnings	1,310,850.00	1,196,190.00
18	Total liabilities and stockholders’ equity	$2,361,010.00	$2,058,830.00

Additional data obtained from an examination of the accounts in the ledger for 2016 are as follows:

A.	The investments were sold for $279,190 cash.
B.	Equipment and land were acquired for cash.
C.	There were no disposals of equipment during the year.
D.	The common stock was issued for cash.
E.	There was a $211,240 credit to Retained Earnings for net income.
F.	There was a $96,580 debit to Retained Earnings for cash dividends declared.

Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. In the operating activities section, use the minus sign to indicate cash outflows, decreases in cash and a net cash outflow, if required. In the investing and financing activities section, use a minus sign only to indicate a NET cash outflow for the section.

Labels and Amount Descriptions

Labels and Amount Descriptions
Cash paid for dividends
Cash paid for merchandise
Cash paid for purchase of equipment
Cash paid for purchase of land
Cash received from customers
Cash received from sale of common stock
Cash received from sale of investments
December 31, 2016
Decrease in accounts payable
Decrease in accounts receivable
Decrease in accrued expenses payable
Decrease in inventories
Decrease in cash
Depreciation
For the Year Ended December 31, 2016
Gain on sale of investments
Increase in accounts payable
Increase in accounts receivable
Increase in accrued expenses payable
Increase in cash
Increase in inventories
Loss on sale of investments
Net cash flow from operating activities
Net cash flow used for operating activities
Net cash flow from investing activities
Net cash flow used for investing activities
Net cash flow from financing activities
Net cash flow used for financing activities
Net income

Statement of Cash Flows

Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. In the operating activities section, use the minus sign to indicate cash outflows, decreases in cash and a net cash outflow, if required. In the investing and financing activities section, use a minus sign only to indicate a NET cash outflow for the section.

Cromme Inc.

Statement of Cash Flows

1	Cash flows from operating activities:
2
3	Adjustments to reconcile net income to net cash flow from operating activities:
4
5
6	Changes in current operating assets and liabilities:
7
8
9
10
11
12
13	Cash flows from investing activities:
14
15
16
17
18
19	Cash flows from financing activities:
20
21
22
23
24	Cash at the beginning of the year
25	Cash at the end of the year

Answer 1

Solution:

Cromme Inc.
Statement of Cash Flows (Indirect Method)
For year ended December 31, 2016
Particulars	Details	Amount
Cash Flow from Operating Activities:
Net Income	$211,240.00
Adjustments to reconcile net income to net cash flow from operating activitiess:
Gain on sale of investment ($279,190 - $240,620)	-$38,570.00
Depreciation ($166,310 - $147,840)	$18,470.00
Changes in current operating assets and liabilities:
Increase in accounts receivables ($228,100 - $208,850)	-$19,250.00
Increase in inventories ($640,910 - $617,650)	-$23,260.00
Increase in accounts payable ($425,280 - $404,550)	$20,730.00
Decrease in accrued expenses payable ($52,020 - $41,990)	-$10,030.00
Net cash flow from operating activities		$159,330.00
Cash Flow from Investing Activities:
Cash received from sale of investments	$279,190.00
Cash paid for purchase of land	-$328,090.00
Cash paid for purchase of equipment ($704,540 - $553,320)	-$151,220.00
Net cash flow used for investing activities		-$200,120.00
Cash Flow from Financing Activities:
Cash received from sale of common stock ($142,000 + $416,700 - $106,000 - $279,900)	$172,800.00
Cash paid for dividends ($20,170 + $96,580 - $24,190)	-$92,560.00
Net cash flow from financing activities		$80,240.00
Net Increase / (Decrease) in Cash		$39,450.00
Cash balance at beginning of year		$586,230.00
Cash balance at end of year		$625,680.00