Question

The comparative balance sheet of Canace Products Inc. for December 31, 20Y6 and 20Y5, is as follows: 1 Dec. 31, 20Y6 Dec. 31, 20Y5 2 Assets 3 Cash $643,740.00 $678,670.00 4 Accounts receivable (net) 567,590.00 546,500.00 5 Inventories 1,010,270.00 983,300.00 6 Investments 0.00 239,830.00 7 Land 520,160.00 0.00 8 Equipment 879,990.00 680,730.00 9 Accumulated depreciation (244,840.00) (200,100.00) 10 Total assets $3,376,910.00 $2,928,930.00 11 Liabilities and Stockholders’ Equity 12 Accounts payable (merchandise creditors) $771,010.00 $748,100.00 13 Accrued expenses payable (operating expenses) 63,500.00 71,400.00 14 Dividends payable 7,850.00 5,880.00 15 Common stock, $2 par 56,000.00 32,000.00 16 Paid-in capital: Excess of issue price over par—common stock 408,000.00 192,000.00 17 Retained earnings 2,070,550.00 1,879,550.00 18 Total liabilities and stockholders’ equity $3,376,910.00 $2,928,930.00 The income statement for the year ended December 31, 20Y6, is as follows: 1 Sales $5,983,200.00 2 Cost of goods sold 2,452,370.00 3 Gross profit $3,530,830.00 4 Operating expenses: 5 Depreciation expense $44,740.00 6 Other operating expenses 3,099,470.00 7 Total operating expenses 3,144,210.00 8 Operating income $386,620.00 9 Other expense: 10 Loss on sale of investments (64,530.00) 11 Income before income tax $322,090.00 12 Income tax expense 102,390.00 13 Net income $219,700.00 Additional data obtained from an examination of the accounts in the ledger for 20Y6 are as follows: a. Equipment and land were acquired for cash. b. There were no disposals of equipment during the year. c. The investments were sold for $175,300 cash d. The common stock was issued for cash. e. There was a $28,700 debit to Retained Earnings for cash dividends declared.

Answer 1

Assumed that Cash flow statement is required using Direct Method

Answer

Statement of cash flows Direct Method For the year endin Ref Amount Amount Cash flows from operating activities Cash received from customers 5,962,110 W.N.1 Cash ments for Merchandise 2,456,430 W.N.2 Cash ent for operating expenses 3,107,370 W.N.3 Cash generated from operations 398,310 Cash ments for Income taxes 0 Income taxes paid 102,390) WN 5 Net cash flow from operating activities 295,920 Cash flows from investing activities Cash received from sale of Investments 175,300 Cash paid for purchase of land 520,160 Cash paid for purchase of Equipment 199,260 WN 6 Net cash used in investing activities 544,120 Cash flows from financing activities Cash received from sale of common stock 240,000 -56000+408000-32000- 192000 Cash paid for dividends 26,730 W.N.4 Net cash from financing activities 213,270 Net increase in cash and cash equivalents 34,930 Cash and cash equivalents at beginning of period 678,670 Cash and cash equivalents at end of period 643,740 W.N.1 Cash receipts from customers Opening Accounts Receivable 546,500 Sales 5,983,200 Closing Balance 567,590 Cash receipts from customers 5,962,110 W.N.2 Cash paid to suppliers Opening Invento 983,300 Closing Stock 1,010,270 COGS 2,452,370 Purchase-COGS+Closing inventory-opening invento 2,479,340 Accounts payable Opening Balance 748,100 Purchases 2,479,340 Discount received 0 771,010 Closing Balance Payments- (Opening Accounts Payable+Purchases-Closing Balance of Accounts Payable Payments- 2,456,430

W.N.3 Expense payable Expense Pavable Less Prepaid Opening Balance 71,400 (net of prepaid, if an Expense for the year less Depreciation expense 3,099,470 Closing Balance 63,500 (net of prepaid, if an Payments-(Opening Payable+Expense-Closing Balance Payments 3,107,370 W.N.4 Retained Earnin Opening Balance 1,879,550 Net Income 219,700 Less: Dividends 28,700 Ending Balance 2,070,550 Dividends 28,700 WN 5 Income Taxes paid Income Tax Pavable+Deferred Tax Liabili Opening Balance 0 Expense for the vear 102,390 Closing Balance 0 Payments (Opening Payable+Expense-Closing Balance) 102,390 Payments- WN 6 Opening Acc De 17,600 Add: Dep expense 5,400 Less: Acc Dep on Asset Sold 0 Ending Acc De 23,000 Equipment Beginning 680,730 Less: Sold 0 Add: Purchase Plug -in 199,260 Endin 879,990 W.N.4 Dividends pavable Beginning 5,880 Add: Dividend Declared 28,700 Less: Ending Balance 7,850 Dividend Paid 26,730