I am good on everything expect for one detail my teacher changed. He also changed the depreciation of the machinery but that was simple.

"Changes - Ignore additional information item #1. The deficit was not written off and the value of the no-par stock was not reduced." I am not sure how this changes the problem

"1.On April 1, 2017, the existing deficit was written off against paid-in capital created by reducing the stated value of the no-par stock."- I'm not sure what this means other than a potential footnote in the statement

Your working papers from the audit contain the following information:

1.On April 1, 2017, the existing deficit was written off against paid-in capital created by reducing the stated value of the no-par stock.

2.On November 1, 2017, 29,600 shares of no-par stock were sold for $257,000. The board of directors voted to regard $5 per share as stated capital.

3. A patent was purchased for $15,000.

4.During the year, machinery that had a cost basis of $16,400 and on which there was accumulated depreciation of $5,200 was sold for $9,000. No other plant assets were sold during the year.

5.The 12%, $100,000, 20-year bonds were dated and issued on January 2, 2005. Interest was payable on June 30 and Dec 31. They were sold originally at 106 ($106,000). These bonds were retired at 100.9 ($100,900) plus accrued interest on March 31, 2017.

6.The 8%, $125,000, 40-year bonds were dated January 1, 2017, and were sold on March 31 at 97 (less issuance cost of $839) plus accrued interest. Interest is payable semiannually on June 30 and December 31. (Proceeds from bond is $125,000 x .97 - $839 = 121,250 - 839 = 120,411; thus, the total discount on the issue date was 4,589 including issuance costs.)

7.Alexander Corporation acquired 70% control in Crimson Company on January 2, 2017, for $100,000 and used the Equity Method for this investment. Crimson Company reported net income of $15,000 for 2017.

8.Extraordinary repairs to buildings of $7,200 were charged (debited) to Accumulated Depreciation-Buildings.

9.Interest paid in 2017 was $10,500 and income taxes paid were $34,000.

My work

Statement of Cash Flows

For the year ended 12/31/2017

Particulars

Amount

Amount

Net income

(90,000+25,000)

$115,000

Adjustments to reconcile net income to

net cash provided by operating activities:

Loss on sale of machinery)

$200

Gain on retirement of Bonds

($1,425)

Depreciation Machinery

$50,200

Depreciation Building

$31,200

Patent Amortization

$10,000

Copyright Amortization

$10,000

Amortization of Bond Discount

$87

Amortization of Bond Premium

($75)

Equity in earnings of subsidiary

($10,500)

Increase in Accounts Receivable

($121,124)

Increase in inventory

($131,700)

Increase in Prepaid expenses

($4,000)

Increase in taxes payable

$10,650

Increase in dividends payable

$19,280

Net Cash flow used by Operating Activities

($137,207)

Net cash after operating activities

($22,207)

Cash Flows from Investing Activities:

Sale of machinery

$9,000

Investment in subsidiarity

($100,000)

Additions to building (507,900-434,200)

($127,300)

Major repairs to buildings

($7,200)

Purchase of machinery

($33,400)

Purchase of patent

($15,000)

Increase in cash surrender value of life insurance

($504)

Net cash flow used by investing Activities

($274,404)

Cash flows from financing Activities:

Redemption of Bonds

($100,900)

Sale of bonds less expense of sale

$120,411

Sale of stock

$257,000

Net cash provided by financing activities

$276,511

Decrease or increase in cash

($20,100)

Cash, January 1, 2017

$298,000

Cash, December 31, 2017

$277,900

Cash paid during the year for:

Interest

$10,500

Income taxes

$34,000