Question

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Golden Corp., a merchandiser, recently completed its 2017 operations. For the year, (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, (5) Other Expenses are all cash expenses, and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes. The company’s balance sheets and income statement follow.

GOLDEN CORPORATION Comparative Balance Sheets December 31, 2017 and 2016
	2017				2016
Assets
Cash	$	179,000			$	123,500
Accounts receivable		105,500				86,000
Inventory		623,500				541,000
Total current assets		908,000				750,500
Equipment		375,400				314,000
Accum. depreciation—Equipment		(165,500	)			(111,500	)
Total assets	$	1,117,900			$	953,000
Liabilities and Equity
Accounts payable	$	117,000			$	86,000
Income taxes payable		43,000				32,600
Total current liabilities		160,000				118,600
Equity
Common stock, $2 par value		622,000				583,000
Paid-in capital in excess of par value, common stock		211,000				182,500
Retained earnings		124,900				68,900
Total liabilities and equity	$	1,117,900			$	953,000

  

GOLDEN CORPORATION Income Statement For Year Ended December 31, 2017
Sales				$	1,867,000
Cost of goods sold					1,101,000
Gross profit					766,000
Operating expenses
Depreciation expense	$	54,000
Other expenses		509,000			563,000
Income before taxes					203,000
Income taxes expense					43,000
Net income				$	160,000

Additional Information on Year 2017 Transactions

1. Purchased equipment for $61,400 cash.
2. Issued 13,500 shares of common stock for $5 cash per share.
3. Declared and paid $104,000 in cash dividends.

Required:
Prepare a complete statement of cash flows; report its cash inflows and cash outflows from operating activities according to the indirect method. (Amounts to be deducted should be indicated with a minus sign.)
  

Answer 1

Answer-

GOLDEN CORPORATION
STATEMENT OF CASH FLOWS (USING INDIRECT METHOD)
FOR THE YEAR ENDED 31 DECEMBER,2017
Particulars		Amount
		$
Cash flow from operating activities
Net Income		160000
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation		54000
Change in operating assets & liabilities
Increase in accounts receivable		-19500
Increase in inventory		-82500
Increase in accounts payable		31000
Increase in income taxes payable		10400
Net cash flow from operating activities (a)		153400
Cash Flow from Investing activities
New equipment purchased		-61400
Net cash Flow from Investing activities (b)		-61400
Cash Flow from Financing activities
Cash dividends paid		-104000
Common stock issued	(13500 shares*$5 per share)	67500
Net cash Flow from Financing activities (c)		-36500
Net Change in cash c=a+b+c		55500
Beginning cash balance		123500
Closing cash balance		179000