Question

Exercise 23-8 Grouper Co. reported $151,400 of net income for 2017. The accountant, in preparing the statement of cash flows, noted the following items occurring during 2017 that might affect cash flows from operating activities. 1. Grouper purchased 100 shares of treasury stock at a cost of $20 per share. These shares were then resold at $25 per share. 2. Grouper sold 100 shares of IBM common at $210 per share. The acquisition cost of these shares was $130 per share. There were no unrealized gains or losses recorded on this investment in 2017. 3. Grouper revised its estimate for bad debts. Before 2017, Grouper’s bad debt expense was 1% of its net sales. In 2017, this percentage was increased to 2%. Net sales for 2017 were $530,400, and net accounts receivable decreased by $10,800 during 2017. 4. Grouper issued 500 shares of its $10 par common stock for a patent. The market price of the shares on the date of the transaction was $23 per share. 5. Depreciation expense is $36,500. 6. Grouper Co. holds 40% of the Nirvana Company’s common stock as a long-term investment. Nirvana Company reported $25,200 of net income for 2017. 7. Nirvana Company paid a total of $1,900 of cash dividends to all investees in 2017. 8. Grouper declared a 10% stock dividend. One thousand shares of $10 par common stock were distributed. The market price at date of issuance was $20 per share. Prepare a schedule that shows the net cash flow from operating activities using the indirect method. Assume no items other than those listed above affected the computation of 2017 net cash flow from operating activities. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).) Exercise 23-8 Grouper Co. reported $151,400 of net income for 2017. The accountant, in preparing the statement of cash flows, noted the following items occurring during 2017 that might affect cash flows from operating activities. 1. Grouper purchased 100 shares of treasury stock at a cost of $20 per share. These shares were then resold at $25 per share. 2. Grouper sold 100 shares of IBM common at $210 per share. The acquisition cost of these shares was $130 per share. There were no unrealized gains or losses recorded on this investment in 2017. 3. Grouper revised its estimate for bad debts. Before 2017, Grouper’s bad debt expense was 1% of its net sales. In 2017, this percentage was increased to 2%. Net sales for 2017 were $530,400, and net accounts receivable decreased by $10,800 during 2017. 4. Grouper issued 500 shares of its $10 par common stock for a patent. The market price of the shares on the date of the transaction was $23 per share. 5. Depreciation expense is $36,500. 6. Grouper Co. holds 40% of the Nirvana Company’s common stock as a long-term investment. Nirvana Company reported $25,200 of net income for 2017. 7. Nirvana Company paid a total of $1,900 of cash dividends to all investees in 2017. 8. Grouper declared a 10% stock dividend. One thousand shares of $10 par common stock were distributed. The market price at date of issuance was $20 per share. Prepare a schedule that shows the net cash flow from operating activities using the indirect method. Assume no items other than those listed above affected the computation of 2017 net cash flow from operating activities. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1

Compute the net cash flow from operating activities using the indirect method as shown
	G Co
	Statement of Cash Flow (Partial)
	For the yr 2017
Cash Flow from operating Activities
Net Income		$151,400
Adjs to reconcile net income
Depreciation Expense	$35,600
Decrease in accounts Receivable	$10,800
Income from equity method investment (25200*40%)	($10,080)
Gain from sale of investment(210-130)*100	($8,000)
Dividend from equity method of investment-1900*40%	$760	$29,080
Net Cash Provided by operating activities		$180,480