Question

Prepare a Statement of Cash Flows using the direct method. Use the following information:

The following information is available for 2017.

1. Equipment (cost $10,000 and accumulated depreciation $4,000) was sold for $7,000. All other changes in Property, Plant and Equipment accounts relate to purchases and depreciation expense, respectively.
2. Intangible Assets costing $10,000 were purchased during 2017.
3. There were $25,000 in payments on the Bonds Payable during 2017

12/31/2016 Closing Trial Balance 55,000 70,000 (4,000) 80,000 9,000 - Cash Accounts Receivable Allowance for Doubtful Accounts Inventory - Prepaid Rent Equity Investments Land 1 Buildings 2 Equipment B Accumulated Depreciation - Buildings 4 Accumulated Depreciation - Equipment 5 Patents 5 Accounts Payable 7 Accrued Liabilities 3 Bonds Payable - Common Stock, $1 Par Additional Paid in Capital 1 Retained Earnings 2 Treasury Stock 3 Dividends 4 Sales Revenue 5 Cost of Goods Sold 5 Salaries Expense 7 Rent Expense 3 Depreciation Expense Amortization Expense Gain on Sale or Property, Plant & Equipment 1 Interest Income 2 Gains and Dividends Received on Equity Investment 3 Interest Expense 4 Loss from Discontinued Operation, net of tax 5 Gain from disposal of Discontinued Operation, net of tax 5 Income Taxes 12/31/2017 Adjusted Trial Balance 40,000 60,000 (3,000) 120,000 8,000 4,000 40,000 165,000 120,000 (25,000) (12,000) 35,000 (60,000) (100,000) (150,000) (26,000) (165,000) (12,000) (11,000) 10,000 (880,000) 453,000 260,000 80,000 15,000 5,000 (1,000) (4,000) (2,000) 11,000 30,000 110,000 105,000 (15,000) (11,000) 30,000 (52,000) (113,000) (100,000) (22,000) (160,000) (12,000) 25,000

Answer 1

Answer with working notes is given below

Dividend and Interest income is taken in Operating activities

Alternatively it can be take in investing activities also

Amount Statement of Cash flows (Direct method) For the year ended December 31, 2017 Cash flows from Operating Activities Cash received from customers $889,000 Cash received as Interest $4,000 Cash received as dividend $2,000 opening balance Bank (balance paid) P & L Account $4,000 $7,000 Equipment $105,000 Accumulated Dep $25,000 Bank $1,000 closing balance $131,000 $895,000 $120,000 $131,000 -$485,000 -$352,000 -$11,000 -$25,000 $11,000 $5,000 $873,000 $22,000 Accumulated Depreciation- Equipment Equipment $4,000 Opening Balance (Dep on Equip sold) P and L Account Closing balance $12,000 (Depreciation during _the year) $16,000 $16,000 Less: Cash payments for Cash paid for Suppliers Cash paid for operating expense Cash paid for Interest Cash paid for Income taxes Net Cash provided by Operating Activities Cash flows from Investing Activities Purchase of Land Purchase of Intangible assets Purchase of Buildings Purchase of Equipment Sale of Equipment Purchase of Equity investment Net Cash used in Investing Activities Cash flows from Financing Activities Issuance of common stock Sale of Treasury stocks Repayment of bonds Bonds raised during he year Payment of dividend Net Cash from Financing Activities Net change in cash Cash and Cash equivalents at beginning of year Cash and Cash equivalents at end of year -$10,000 -$10,000 -$55,000 -$25,000 $7,000 -$4,000 -$97,000 $9,000 $11,000 -$25,000 $75,000 -$10,000 ($12,000+$38,000-$40,000) $60,000 -$15,000 $55,000 $40,000 Working notes: A Amount of cash received from Customers Sales Add: Decrease in Accounts receivable Less: Decrease in allowance for doubtful accounts Net cash received from customers $880,000 $10,000 -$1,000 $889,000 Cost of inventory purchased Cost of Goods sold Add: Increase in inventory Merchandise purchase $453,000 $40,000 $493,000 Amount of cash paid to suppliers of merchandise cost of purchase Les: Increase in Accounts payable Cash paid for Suppliers $493,000 -$8,000 $485,000 Amount of cash paid for Operating expense Salaries and rent expense Less: Decrease in prepaid rent Add: Decrease in Accrued expense Net cash paid for operating expense $340,000 $1,000 $13,000 $352,000