Question

Problem 23-1 The following are Martinez Corp.s comparative balance sheet accounts at December 31, 2017 and 2016, with a column showing the increase (decrease) from 2016 to 2017 COMPARATIVE BALANCE SHEETS Increase (Decrease) $106,000 2017 $806,900 1,131,700 1,842,900 3,300,200 2016 $700,900 1,159,400 1,730,100 2,968,200 Cash Accounts receivable Inventory Property, plant, and equipment Accumulated depreciation Investment in Myers Co Loan receivable (27,700) 112,800 332,000 (136,000) 30,300 247,500 $664,900 (1,173,600) (1,037,600) 307,300 247,500 $6,462,900 277,000 $5,798,000 Total assets Accounts payable Income taxes payable Dividends payable Lease liabililty Common stock, $1 par Paid-in capital in excess of par-common stock Retained earnings $1,020,900 30,000 80,500 392,000 500,000 1,489,000 2,950,500 $6,462,900 $950,800 50,200 100,500 $70,100 (20,200 20,000 392,000 500,000 1,489,000 2,707,500 $5,798,000 243,000 $664,900 Total liabilities and stockholders' equity Additional information: 1. On December 31, 2016, Martinez acquired 25% of Myers Co.'s common stock for $277,000. On that date, the carrying value of Myers's assets and liabilities, which approximated their fair values, was $1,108,000. Myers reported income of $121,200 for the year ended December 31, 2017. No dividend was paid on Myers's common stock during the year. 2. During 2017, Martinez loaned $291,600 to TLC Co., an unrelated company. TLC made the first semiannual principal repayment of $44,100, plus interest at 10%, on December 31, 2017. 3. On January 2, 2017, Martinez sold equipment costing $60,000, with a carrying amount of $38,100, for $40,400 cash 4. On December 31, 2017, Martinez entered into a capital lease for an office building. The present value of the annual rental payments is $392,000, which equals the fair value of the building. Martinez made the first rental payment of $59,900 when due on January 2, 2018 5. Net income for 2017 was $323,500 6. Martinez declared and paid the following cash dividends for 2017 and 2016 2017 2016 Declared December 15, 2017 Paid Amount$80,500 December 15, 2016 February 28, 2017 $100,500 February 28, 2018 Prepare a statement of cash flows for Martinez Corp. for the year ended December 31, 2017, using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).) MARTINEZ CORP Statement of Cash Flows Adjustments to reconcile net income to Click if you would like to Show Work for this question: Open Show Work

Answer 1

MARTINEZ CORP Statement of Cash Flow For the Year Ended December 31, 2017 Cash flows from operating activities Net Income Adiustments to reconcile net income to net cash provided by operating activities: Loss on sale of equipment Depreciation expense Equity in earnings of Myers co's (121,200 x 25% Decrease in Accounts receivable Increase in Invento Increase in accounts payable Decrease in Income tax payable Net Cash provided by Operating acitivites (a) 323,500 2,300 157,900 (30,300) 27,700 112,800 70,100 (20,200) 90,100 413,600 Cash flows from Investing activities: Proceeds from sale of equipment Loan to TLC Principal recovery of Loan receivable Net cash used by Investing activities (b 40,400 (291,600) 44,100 207,100) Cash flows from financing activities: Dividend paid Net cash used by financing acitivities (c) (100,500) (100,500) Net increase (decrease) in cash during the vear (atb+C Add: Cash at the beginning of year Cash Balance at the end of year 106,000 700,900 806,900

Non cash investing and financing activities Issuance of capital lease liability for new facto 392,000 Working Notes: Loss/(Gain) on sale of equipment Carrying Amount of equipment Less: Cash proceeds Loss/(Gain) on sale of equipment 38,100 (40,400) (2,300) Calculation of Depreciation expense Accumulated Depreciation on equipment sold Cost of equipment sold less: Carrying Amount Accumulated Depreciation on equipment sold 60,000 (38,100) 21,900 Accumulated Depreciation as on 12/31/17 Add: Accumulated depreciation on equipment sold Less: Accumulated Depreciation as on 12/31/16 Depreciation expense 1,173,600 21,900 (1,037,600) 157,900