Question

Comparative balance sheets and an income statement for Joe Smith Company are presented below.

Using the indirect method, prepare in proper financial statement format a statement of cash flows for the year ended December 31, 2018

           

	Dec. 31, 2018	Dec. 31, 2017
Assets
Cash	90,600	145,900
Accounts receivable (net)	51,300	58,000
Inventory	147,200	135,000
Investments, long-term	12,000	60,000
Equipment	493,000	375,000
Accumulated depreciation	(127,700)	(128,000)
Total assets	666,400	645,900
Liabilities and stockholders' equity
Liabilities:
Accounts payable	61,500	42,600
Income tax payable	33,600	92,400
Bonds payable, due 2024	0	100,000
	95,100	235,000
Stockholders' equity:
Common stock, $10 par	250,000	200,000
Paid-in capital in excess of par value	75,000	50,000
Retained earnings	246,300	160,900
Total stockholders' equity	571,300	410,900
Total liabilities and stockholders' equity	666,400	645,900

		2018
Sales		623,000
Cost of merchandise sold		348,500
Gross profit		274,500
Operating expenses:
Depreciation expense	24,700
Other operating expenses	75,300	100,000
Income from operations		174,500
Other revenues and expenses:
Gain on sale of investments	5,000
Loss on sale of equipment	(2,000)	3,000
Income before income tax		177,500
Income tax expense		64,100
Net income		113,400

Additional data:

(a)	Equipment with an original cost of $39,000 and a book value of $14,000 was sold.
(b)	Equipment was purchased for $157,000.
(c)	Bonds payable for $100,000 were retired by payment at their face amount.
(d)	5,000 shares of common stock were issued at $15 for cash.
(e)	Cash dividends declared were paid $28,000.

Answer 1

Joe Smith Company Inc
Statement of Cash Flows
For the Year Ended December 31, 2018	Amount	Amount
Cash Flows from Operating Activities:
Net income		$113,400
Adjustments to reconcile net income to
Net cash provided by operations:
Depreciation expense		$24,700
Less Gain on sale of investment		($5,000)
Chnages in Current operating assets and liabilities:
Decrease in Accounts receivable(58000-51300)		$6,700
Increase in inventory(135000-147200)		($12,200)
Increase in accounts payable		$18,900
Decrease in Income taxes payable(92400-33600)		($58,800)
Net cash used in operating activities		$87,700
Cash Flows from Investing Activities:
Sale of Equipment	$14,000
Cash paid for Equipment	($157,000)
Sale of Investment(60000-12000)+5000	$53,000
Net Cash used in Investing Activities		($90,000)
Cash Flows from Financing Activities
Cash received from stock issuance-50000*10	$50,000
Additional Paid in Capital-5000*5	$25,000
Bonds Payable retired	($100,000)
Dividends paid	($28,000)
Net Cash provided by Financing Activities		($53,000)
Net decrease in Cash		($55,300)
Cash at Beginning of Period		$145,900
Cash at End of Period		$90,600