Question

Problem 23-2 The comparative balance sheets for Carla Corporation show the following information. Cash Accounts receivable Inventory Available-for-sale debt investments Buildings Equipment Patents December 31 2017 2016 $33,300 $13,000 12,100 9,900 12,000 9,000 -O 3,000 -0- 29,400 44,800 19,800 5,000 6,300 $107,200 $90,400 Allowance for doubtful accounts Accumulated depreciation-equipment Accumulated depreciation-building Accounts payable Dividends payable Notes payable, short-term (nontrade) Long-term notes payable Common stock Retained earnings $3,000 2,100 -0- 5,000 -0- 3,000 31,000 43,000 20,100 $107,200 $4,500 4,400 6,100 3,000 5,000 3,900 25,000 33,000 5,500 $90,400

Net Income: 19600 (ret earn beg 5,500, cash div paid 5000, ret earn end 20100)

Answer 1

Answer with working is given below

T accounts are also given to show flow of transactions and helps in understanding cash flow statement in a better way

CARLA CORPORATION Cash Flow Statement under Indirect method Working notes: Cash flows from Operating Activities Earnings Before tax and interest Add: Adjustments to reconcile net income to Depreciation Patent amortization Loss on sale of Equipment Profit on Insurance proceeds of Building Profit on sale of available for sale securities Operating profit before working Capital changes Increase in Accounts Receivable Decrease in Allowance for doubtful accounts Increase in Inventory Increase in Accounts payable Operating cash flow before tax and interest Amount Equipment opening balance Bank $23,100 $19,800 Accumulated Dep $20,000 Bank $4,400 $2,500 $2,100 $16,000 P and L Account $4,100 Long term note $1,300 $44,800 closing balance $4,100 $55,800 $55,800 ($6,800) ($1,700) Accumulated Depreciation- Equipment $4,400 Opening Balance $22,100 ($2,200) ($1,500) ($3,000) $2,000 $4,400 Equipment $2,100 P and LAccount Closing balance $2,100 (Depreciation during the year) $6,500 $17,400 $6,500 ($6,500) |Таx рaid Interest paid Net Cash provided by Operating Activities Cash flows from Investing Activities Purchase of Equipment Insurance proceeds of Building Sale of Equipment Sale of investment Net Cash provided by Investing Activities Cash flows from Financing Activities Repayment of short term notes payable Dividend paid Net Cash used by Financing Activities Net Cash inflow/(outflow) Opening balance of cash Closing balance of cash ($2,000) $8,900 Long term note payable $10,000 Opening Balance $25,000 Common stock ($20,000) $16,000 Equipment $30,100 Closing balance $31,000 $2,500 $41,000 $41,000 $4,700 $17,300 Building $29,400 Accumulated Dep ($900) ($5,000) ($5,900) opening balance Profit and Loss A/C $6,100 $6,800 Bank $30,100 $20,300 $36,200 $36,200 $13,000 $33,300 Accumulated Depreciation - Building Building $6,100 Opening Balance $6,100 Significant non cash transaction Equipment purchased by issue of Long term note payable $16,000 $6,100 $6,100 1 $10,000 of the long-term note payable was paid by issuing common stock 2 Note Earnings before interest and tax Net profit (Difference between closing and opening balance of Retained Earnings) Add: Interest |Тax Earnings before interest and tax $14,600 $2,000 $6,500 $23,100 H