Prepare an indirect method statement of cash flows for 2018. A T-account worksheet is provided to assist you but you will only be rewarded for answering the question in the spaces provided on the blank Statement of Cash Flows. Orpurt's Oats, Inc. Consolidated Balance Sheet As of Dec. 31 (S Dollars) 2018 2017 Assets Current assets Cash (Note 1) $45,000 $30,000 Accounts receivable, net 62,500 31,800 Inventories 60,997 90,994 Marketable securities-available for sale (Note 2) 10,000 11,750 178,497 164,544 Deferred tax asset 40,383 0 Right of Use Asset (Note 3) 76,712 0 Fixed assets (Note 4) 660,500 647,000 Total Assets Liabilities $956,092 $811,544 Current Liabilities Accounts payable and accrued charges $9,401 $39,324 Obligation under finance lease (Note 5) 20,711 0 Dividends payable 0 8,000 30,112 47,324 Long-term obligation under finance lease (Note 5) 57,475 0 Long-term debt (Note 6) Deferred tax liability 8541 852 34,500 83,400 122,941 131,576 Stockholders' Equity Capital stock $5 par (Note 7) 313,000 292,000 Additional Paid in Capital Excess of Par 232,500 225,000 Additional Paid in Capital Stock Options 28,000 21,000 Retained earnings 278,151 140,218 AOCI: Unrealized gain on securities available for sale (Note 2) Less: Treasury Shares (Note 7) 1,500 1,750 (20,000) 0 833,151 679,968 Total Liabilities and Shareholders' Equity $956,092 $811,544 1 Year Ended Dec. 31 (S Dollars) Net Sales Sales Revenues Costs and expenses Cost of Sales Depreciation expense Orpurt's Oats, Inc Consolidated Statement of Earnings Amortization expense (leased asset right of use) Incentive compensation expense Interest expense Loss (gain) on sales and retirement of equipment (Note 4) Realized loss (gain) on sale of available for sale securities (Note 2) Income Tax expense Net Earnings 2018 $1,955,285 1,678,093 45,900 19,178 7,000 3,109 (500) (820) 10,000 $193,325 Orpurt's Oats, Inc Notes to Consolidated Financial Statements Year Ended Dec. 31 (S Dollars) Note 1: Cash and cash equivalents are defined to be cash and all highly liquid investments with maturities of less than 30 days. Note 2: Securities on hand are classified as "securities available for sale" (SAFS). SAFS consist only of bonds acquired at par (face amount) (thus there is no premium or discount to amortize). SAFS on December 31, 2018 had an acquisition cost of $8,500 and a fair market value of $10,000. Gross unrealized gains total $1,600 and gross unrealized losses total $100. SAFS with a cost of $5,000 were sold during the year generating a realized gain of $820. SAFS were purchased during the year. The net unrealized holding gain on securities available for sale changed as follows during 2018: Balance, December 31, 2017 Realized (gain) loss on securities sold during the year $1,750 (820) Change in net unrealized gain (loss) on securities held at year end Balance, December 31 2018 570 $1,500 Note 3: The Company leased an asset in 2016. As a result, a right of use asset was initially recorded at $95,890 representing the present value of the lease payment and subsequently amortized (straight line). See Note 5. 2 Note 4: Fixed assets consist of: Property, plant and equipment (at cost) Accumulated depreciation 2018 2017 $727,500 $ 702,000 (67,000) (55,000) $660,500 $647,000 During 2018, the company made one purchase of equipment. It acquired a brand new Genetic Oat Modifier Machine worth $62,000 for cash. The machine is used to modify Oat flower genetics to create new Oats such as the "Quaker One Minute Oat" popular for its quick preparation time. The Company sold equipment during 2018 at a gain of $500. Note 5: The Company leased an oat planter on January 1, 2018. The planter could have been purchased for $100,000. The lease term is five years. The lease is non-cancellable. It has a guaranteed residual of $5,000 and the Company expects the planter to be worth more at the end of the lease term. There are no renewal terms and the planter reverts to the lessor at termination of the lease. The implicit lease discount rate is 4%. Payments of $20,711 are made annually starting January 1, 2018 and the present value of the lease payments at inception of the lease was $95,890. HINT: Here is the amortization table to help you determine the cash flows: Orpurt's Oats, Inc. LEASE AMORTIZATION SCHEDULE ANNUITY-DUE BASIS Annual Reduction Lease Date Payment (a) Interest (4%) on Liability (b) of Lease Liability (c) Lease Liability 1/1/18/ 1/1/18 (d) $95,890.35 $ 20,711.11 $ -0- 1/1/19 20,711.11 3,007.17 $20,711.11 17.703.94 75,179.24 57,475.30 1/1/20 20,711.11 2,299.01 18,412.10 39,063.20 1/1/21 20,711.11 1,562.53 19,148.58 19,914.62 1/1/22 20,711.11 796.49 19,914.62 0.00 $103,555.55 $7,665.20 $95,890.35 (a) Lease payment as required by lease. (b) Four percent of the preceding balance of (d) except for wins since this is an annuity due, no time has elapsed at the date of the first payment and therefore no interest has accrued. (c) (a) minus (b). (d) Preceding balance minus (c). "Rounded by $0.00. 3 Note 6: The only long-term debt was issued January 1" 2016 to yield 12%. The coupon rate on the debt is 10%, paid semi-annually. The face value of the debt outstanding is $1,000. The bonds are to be outstanding for twenty years with payments made each June 30th and December 31" Issue 2018 2017 10% coupon bonds due 12/31/2035 (Net of unamortized discount of $146 in 2018 and $148 in 2017) $854 $852 Note 7: Common stock has a par value of five dollars per share. The following equity transactions took place during 2018. One thousand shares were purchased for the treasury. There were no other treasury stock transactions. Shares were also issued on the open market (not from treasury) and this offering resulted in 4,200 shares issued (sold) for $28,500. The company declared and paid dividends to shareholders during 2018. Cash & Equivalents Operating Accounts Receivable 31.800 62,500 Inventories 90,994 60,997 Mktble Sec, AFS, at cost Fair Value Adjust SAFS 1,750 Investing 10,000 Financing 8,500 1,500 Deferred Tax Asset Right of Use Asset 0 0 40,383 76,712 PP&E, at cost Accum Depr 702,000 55,000 727,500 67,000 5 Dividends Pavable Accts Pay and Accr Liab Current Fin Lease Oblig 0 39,324 9,401 Long-Term Fin Lease Cap 20,711 8,000 Long Term Debt 57,475 Deferred Tax Liab Capital Stock $5 Par 852 83,400 292,000 854 34,500 313.000 APIC Excess of Par APIC Stock Options Retained Earnings 225,000 21,000 140,218 232.500 AOCI Unreal G/L on MS 1.750 0 28,000 278,151 Treasury Stock 1,500 20,000 Orpurt's Oats, Inc Consolidated Statement of Cash Flows Year Ended Dec. 31 Operations Earnings Reconciling items (provide explanations) Cash from (used for) operations (Continued on next page) R IS Dollars 2018 6 99 95 T G 244 U B 6 0 Investing Activities Sources/Uses of cash (provide explanations) Cash from (used for) investing activities Financing Activities Sources/Uses of cash (provide explanations) Cash from used for) financing activities Increase Idecrease) in cash and cash eques 8 45 G R 9