Question

Golden Corp., a merchandiser, recently completed its 2018 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, 2018 and 2017
	2018				2017
Assets
Cash	$	164,000			$	107,000
Accounts receivable		83,000				71,000
Inventory		601,000				526,000
Total current assets		848,000				704,000
Equipment		335,000				299,000
Accum. depreciation—Equipment		(158,000	)			(104,000	)
Total assets	$	1,025,000			$	899,000
Liabilities and Equity
Accounts payable	$	87,000			$	71,000
Income taxes payable		28,000				25,000
Total current liabilities		115,000				96,000
Equity
Common stock, $2 par value		592,000				568,000
Paid-in capital in excess of par value, common stock		196,000				160,000
Retained earnings		122,000				75,000
Total liabilities and equity	$	1,025,000			$	899,000

  

GOLDEN CORPORATION Income Statement For Year Ended December 31, 2018
Sales				$	1,792,000
Cost of goods sold					1,086,000
Gross profit					706,000
Operating expenses
Depreciation expense	$	54,000
Other expenses		494,000			548,000
Income before taxes					158,000
Income taxes expense					22,000
Net income				$	136,000

Problem 12-6A Indirect: Statement of cash flows LO P1, P2, P3

Additional Information on Year 2018 Transactions

1. Purchased equipment for $36,000 cash.
2. Issued 12,000 shares of common stock for $5 cash per share.
3. Declared and paid $89,000 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,2018
Particulars		Amount
		$
Cash flow from operating activities
Net Income		136000
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		-12000
Increase in inventory		-75000
Increase in accounts payable		16000
Increase in income taxes payable		3000
Net cash flow from operating activities (a)		122000
Cash Flow from Investing activities
New equipment purchased		-36000
Net cash Flow from Investing activities (b)		-36000
Cash Flow from Financing activities
Cash dividends paid		-89000
Common stock issued		60000
Net cash Flow from Financing activities (c)		-29000
Net Change in cash c=a+b+c		57000
Beginning cash balance		107000
Closing cash balance		164000