Question

Problem 12-08A Presented below are the financial statements of Flounder Company. Flounder Company Comparative Balance Sheets December 31 Assets 2022 2021 Cash $ 77,000 $ 44,000 Accounts receivable 44,000 30,800 Inventory 61,600 44,000 Property, plant, and equipment 132,000 171,600 Accumulated depreciation (70,400) (52,800) Total $244,200 $237,600 Liabilities and Stockholders' Equity Accounts payable $ 33,000 $ 41,800 Income taxes payable 15,400 17,600 Bonds payable 37,400 72,600 Common stock 39,600 30,800 Retained earnings 110,000 83,600 Total $244,200 $237,600 Flounder Company Income Statement For the Year Ended December 31, 2022 Sales revenue $532,400 Cost of goods sold 385,000 Gross profit 147,400 Selling expenses $39,600 Administrative expenses 13,200 52,800 Income from operations 94,600 Interest expense 6,600 Income before income taxes ৪৪,000 Income tax expense 17,600 $70,400 Net income Additional data: 1. Depreciation expense was $38,500. 2. Dividends declared and paid were $44,000. 3. During the year equipment was sold for $18,700 cash. This equipment cost $39,600 originally and had accumulated depreciation of $20,900 at the time of sale. Further analysis reveals the following. 1. Accounts payable pertain to merchandise suppliers. 2. All operating expenses except for depreciation were paid in cash. 3. All depreciation expense is in the selling expense category. 4. All sales and purchases are on account.

Answer 1

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Flounder Company	Amount $		Answer a
Cash Received from sale			Cash Flow Direct Method	Amount $	Amount $
Opening Accounts Receivable	30,800.00		Cash Receipts from
Add: Sales	532,400.00		Cash Received from sale	519,200.00		See A
Less: Closing Accounts Receivable	44,000.00		Total cash inflows		519,200.00
Cash Received from sale	519,200.00	A	Interest paid	6,600.00
			Inventory purchased	393,800.00		See C
Inventory purchased			Cash paid for Operating Expense	14,300.00		See G
Cost of goods sold	385,000.00		Income Tax paid	19,800.00		See D
Add: Closing Inventory	61,600.00		Total cash outflows		434,500.00
Less: Opening Inventory	44,000.00		Net Cash inflow from operating activities		84,700.00	J
Inventory purchased	402,600.00	B
			Cash Flow from Investing Activities
Cash paid for Inventory purchased			Equipment sold	18,700.00
Opening Accounts Payable	33,000.00		Net Cash outflow from Investing Activities		18,700.00	K
Add: Purchases	402,600.00	B
Less: Closing Accounts Payable	41,800.00		Cash Flow from Financing Activities
Cash paid for Inventory purchased	393,800.00	C	Debentures paid	(35,200.00)		See H
			Share capital issued	8,800.00		See I
Income tax paid			Payment of dividends	(44,000.00)
Income tax expense	17,600.00		Net Cash inflow form Financing Activities		(70,400.00)	L
Add: Income tax payable- opening	17,600.00
Less: Income tax payable- closing	15,400.00		Net Increase in cash		33,000.00	M=J+K+L
Income tax paid	19,800.00	D	Add: Beginning Cash Balance		44,000.00	N
			Ending cash Balance		77,000.00	O=M+N
Operating Expenses paid
Selling Expense	39,600.00
Opening balance	72,600.00
Less: Closing balance	37,400.00
Bonds Payable paid	35,200.00	H
Share capital issued
Closing balance	39,600.00
Less: Opening balance	30,800.00
Share capital issued	8,800.00	I