Question

Diane's balance sheets as of December 31, 2016 and 2017 are presented below: 2016 $ 310,000 300,000 Cash Accounts receivable, net Long-term notes receivable Discount on long-term notes receivable Property, plant, and equipment - at cost Accumulated depreciation TOTAL ASSETS 2017 $ 443,456 430,000 100,000 ( 17,356) 950,000 (318,100) $1.588.000 750,000 (325,000) $1.035.000 Accrued liabilities Unearned revenues Short-term debt Common stock, $1 par value Additional paid-in-capital Retained earnings TOTAL LIABILITIES & SE $ 230,000 220,000 25,000 60,000 200,000 300,000 S1.035.000 $ 175,000 310,000 15,000 110,000 315,000 663,000 $1.588.000 Diane's 2017 income statement is presented below: Service revenues Other revenues and gains/losses, net Selling, general, and administrative expenses Interest expense Income before income taxes Income tax expense Net income $1,800,000 1,987 1,209,000 1,000 588,013 125,013 $ 463.000 3. Diri SELECTED OTHER INFORMATION: 1. On January 1, 2017, Diane provided services to a customer in exchange for a $100,000, zero interest bearing note receivable. Diane will collect the note principal in full on January 1, 2020. The market rate of interest at the time of the sale was 10%. During 2017, all other services provided by Diane were on a cash or short-term credit (AR) basis. During 2017, Diane declared and distributed a cash dividend. During 2017, Diane issued, in exchange for cash, 50,000 additional shares of her common stock. During 2017, Diane both bought and sold some PP&E. Diane uses the straight-line depreciation method on all of its PP&E items and calculates depreciation to the nearest full-month. Diane assumes a $0 salvage value on each PP&E item. Diane's PP&E sales related to two items: a. A machine. Diane purchased the machine on 06-01-14 for $86,400. The machine had an eight-year useful life. Diane sold the machine on 11-01-17 for $45,000. b. A building. When Diane purchased the building, she paid $100,000. Diane sold the building for $20,000. As a result of the sale, Diane recorded a loss of $5,000. 6. During 2017, Diane did NOT enter into any non-cash investing or financing activities. Prepare Diane's Statement of Cash Flows in good form) for the year ended December 31, 2017. Diane uses the indirect method.

Answer 1

Diane's Bal. PPE 750000 Equip Build 386400 86400 100000 463000 112513 Bal Statement of Cashflow For the period ending 31.12.2017 Cashflow from Operating Activity Net Income Adjustments: Depreciation Expense Loss on sale Increase in Note Receivable Increase in Accounts Receivable Decrease in accrued liabilities Increase in Unearned Revenues Decrease in short term debt Cash generated from Operating Activity 950000 1136400 1987 1136400 -82644 - 130000 -55000 90000 -10000 Sale of PPE Accum. Depre - PPE 119413 Bal Depreciation Expense 325000 -73144 389856 318100 437513 437513 Cashflow from Investing Activity PPE sale PPE purchased Cash used for Investing Activity 65000 -386400 -321400 Equip Build Gain on sale Equip. Sale of PPE 86400 Accum. Depre 100000 Cash 3013 Loss on sale Build Cash 189413 119413 45000 5000 20000 189413 50000 115000 -100000 Net loss on sale = 1987 - 5000 = 3013 Cashflow from Financing Activity Common Stock issued Additional paid in capital Dividends paid(300000+463000-663000) Cash generated from Financing Activity Net Increase in Cash Beginning Cash Balance Ending Cash Balance 65000 133456 310000 443456