Question

Problem 125

Selected financial statement information and additional data for Johnston Enterprises is presented below:

Johnston Enterprises Balance Sheet and Income Statement Data
		December 31,2017			December 31,2016
Current Assets:
Cash		$179,520			$118,700
Accounts Receivable		233,400			308,800
Inventory		395,200			344,100
Total Current Assets		808,120			771,600
Property, Plant, and Equipment		1,280,300			1,147,000
Less: Accumulated Depreciation		(464,100)			(437,000)
Total Assets		1,624,320			1,481,600
Current Liabilities:
Accounts Payable		$190,100			$100,300
Notes Payable		48,300			67,000
Income Taxes Payable		84,300			75,300
Total Current Liabilities		322,700			242,600
Bonds Payable		350,000			387,300
Total Liabilities		672,700			629,900
Stockholders' Equity:
Common Stock		510,000			467,500
Retained Earnings		441,620			384,200
Total Stockholders' Equity		951,620			851,700
Total Liabilities & Stockholders' Equity		1,624,320			1,481,600
Sales Revenue		$1,629,300			$1,523,000
Less Cost of Goods Sold		757,500			711,000
Gross Profit		871,800			812,000
Expenses:
Depreciation Expense		152,400			135,200
Salaries and Wages Expense		384,200			354,100
Interest Expense		31,300			31,300
Loss on Sale of Equipment		11,200			0
Income Before Taxes		292,700			291,400
Less Income Tax Expense		117,080			116,560
Net Income		175,620			174,840

Additional Information:
During the year, Johnston sold equipment with an original cost of $138,400 and accumulated depreciation of $125,300 and purchased new equipment for $271,700.

Prepare a statement of cash flows for the year ending December 31, 2017. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1

Johnston Enterprises
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities:
Net income		$ 175,620
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	$ 152,400
Loss on sale of Equipment	$ 11,200
Decease in accounts receivables	$ 75,400
Increase in inventory	-$ 51,100
Increase in accounts payable	$ 89,800
Increae in income tax payable	$ 9,000
		$ 286,700
Net cash from Operating Activities		$ 462,320
Cash flows from investing activities:
Sale of equipment	$ 1,900
Purchase of Equipment	-$ 271,700
Net cash from Investing Activities		-$ 269,800
Cash flows from financing activities:
Repayment of notes payable	-$ 18,700
Issue of Common stock	$ 42,500
Dividends paid	-$ 118,200
Repayment of Bonds	-$ 37,300
Net cash from Financing Activities		-$ 131,700
Net change in cash during the year		$ 60,820
Add: Beginning cash balance		$ 118,700
Ending cash balance		$ 179,520

General notes for cash flow
Cash is increased when Current liability increase or Current asset Decrease.
Cash is Decreased when Current liability Decrease or Current asset Increase.
Depreciation or loss on sale of any asset is a non cash expense hence it will be added to net income to get operating cash
Profit on sale of asset or investment is a non cash profit and hence will be deducted from operating income.