Mastery Problem: Statement of Cash Flows Championship Boxing, Inc. Championship Boxing, Inc. is a small manufacturer of cardboard boxes of all sizes. You have reported for your first day of work, and the company is in an uproar, Yearly financial statements are being prepared, but a computer malfunction of the company's new BOX-9000 computer has inadvertently erased parts of the company's balance sheet, along with almost all related data except the pmpany's statement of cash flows. The IT department is working to retrieve earlier backups, but estimates that the reconstruction of the data will take about 24 hours Unfortunately, financial statements are to be presented at a stockholders' meeting in one hour. The company uses the Indirect method to prepare its statement of cash flows (rather than the direct method), so your new supervisar believes the missing data for the balance sheet can be prepared using the statement of cash flows. You are assigned this task, since you were top student in your business school class. Meanwhile, the supervisor will go to the stockholders' meeting and give some introductory remarks In addition to the statement of cash flows, the following data survived the computer mishap: The investments were sold for $280,000 cash Equipment was acquired for 5151,920 cash. Land was acquired for $326,000 cash. There were no disposals of equipment during the year. 12,500 shares of common stock were sold for cash during the year. There was a $96,000 debit to retained Earnings for cash dividends declared. Statement of Cash Flows Your supervisor has provided you with the following statement of cash flows, prepared using the indirect method. Recall that the statement of cash flows consists of three sections: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. Review the statement, and then proceed to the next panel I Championship Boxing, Inc. Statement of Cash Flows For the Year Ended December 31, 2018 Cash flows from (used for operating activities: Net income $136.540 Adjustments to reconcile net income to net cash flow from operating activities: Depreciation 18.400 Gain on sale of investments (50,000) Changes in current operating assets and liabilities: Increase in accounts receivable (25,390) Increase in Inventores (33.350) Increase in accounts payable 41,070 Dease in accrued expenses payable (12.4703 et cash flow from operating activities Cash flow from used for) investing activities: Cheved from sale of investments $280,000 Cach paid for purchase of land (325.000) Cash paid for purchase of equipment (151.920) et show used for investing activities Cash flow from used for financing activities Cash red from sale of common stock $167,500 5124.000 (197,9201 12/8/20 DOLL o 2 Priser Home End Insert 12 f F5 Fo 7 FO F10 $ * % 5 & 7 ( 9 4 ) O 6 8 ll { R. T Y U I o (91,200) Cash paid for dividends Net cash flow from financing activities 96,300 Net Increase in cash $23,180 585,920 Cash balance, January 1, 2018 I $609,100 Cash balance, December 31, 20YB Balance Sheet Using the information on above, complete the following comparative balance sheet. Championship Boxing, Inc. Comparative Balance Sheet December 31, 2018 and 2017 $ Total assets Liabilities 432,900 3391,830 I 41,150 53,620 Accounts payable (merchandise creditors) Accrued expenses payable (operating expenses) Dividends payable Total liabilities 24,000 19,200 $498,050 $ 464,650 150,000 $100,000 Stockholders' Equity Common stock, $4 par Pald-in capital in excess of par Retained earnings 417,500 280,000 1,291,010 Total stockholders' equity $1,858,510 Total llabilities and stockholders' equity Mastery Problem: Statement of Cash Flows Championship Boxing, Inc. Championship Boxing, Inc. is a small manufacturer of cardboard boxes of all sizes. You have reported for your first day of work, and the company is in an uproar. Yearly financial statements are being prepared, but a computer malfunction of the company's new BOX-9000 computer has inadvertently erased parts of the company's balance sheet, along with almost all related data except the company's statement of cash flows. The IT department is working to retrieve earlier backups, but estimates that the reconstruction of the data will take about 24 hours. Unfortunately, financial statements are to be presented at a stockholders' meeting in one hour. The company uses the Indirect method to prepare its statement of cash flows (rather than the direct method), so your new supervisor believes the missing data for the balance sheet can be prepared using the statement of cash flows. You are assigned this task, since you were top student in your business school class. Meanwhile, the supervisor will go to the stockholders' meeting and give some introductory remarks In addition to the statement of cash flows, the following data survived the computer mishap: The investments were sold for $280,000 cash. Equipment was acquired for $151,920 cash. Land was acquired for $326,000 cash. There were no disposals of equipment during the year. 12,500 shares of common stock were sold for cash during the year. There was a $96,000 debit to retained Earnings for cash dividends declared. Statement of Cash Flows Your supervisor has provided you with the following statement of cash flows, prepared using the Indirect method. Recall that the statement of cash flows consists of three sections: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities Review the statement, and then proceed to the next panel. 1:46 Print Item Championship Boxing, Inc. Statement of Cash Flows For the Year Ended December 31, 2048 Cash flows from (used for) operating activities: Net Income $186,540 Adjustments to reconcile net income to net cash flow from operating activities: Depreciation 18,400 Gain on sale of investments (50,000) Changes in current operating assets and liabilities: Increase in accounts receivable (25,390) Increase in inventories (33,350) Increase in accounts payable 41,070 Decrease in accrued expenses payable (12,470) Net cash flow from operating activities Cash flows from (used for) investing activities: Cash received from sale of Investments $280,000 Cash paid for purchase of land (326,000) Cash paid for purchase of equipment (151,920) Net cash flow used for investing activities $124,800 (197,920) Cash from used for financing activities: Print Item $187,500 (91,200) Cash flows from (used for) financing activities: Cash received from sale of common stock Cash paid for dividends Net cash flow from financing activities Net increase in cash Cash balance, January 1, 2018 Cash balance, December 31, 20Y8 96,300 $23,180 585,920 $609,100 Balance Sheet Using the information on above, complete the following comparative balance sheet. Championship Boxing, Inc. Comparative Balance Sheet December 31, 2048 and 2017 2018 2017 Assets Cash 609,100 $585,920 Accounts receivable (net) 230,970 205,580 inventories 651,770 618,420 230,000 Land 326,000 0 Equipment 705,120 553,200 Accumulated depreciation equipment (166,400) 148,000 Total assets Liabilities 432,900 $391,830 Accounts payable (merchandise creditors) Accrued expenses payable (operating expenses) Dividends payable 41,150 53,620 24,000 19,200 Total abilities $498,050 464,650 Stockholders' Equity Common stock, $4 par $100,000 Pald-in capital in excess of par 150,000 417,500 280,000 Retained earnings 1,291,010 Total stockholders' equity $1,858,510 $ Total liabilities and stockholders' equity