Problem 14-14 Prepare and Interpret a Statement of Cash Flows [LO14-1, LO14-2]

A comparative balance sheet for Lomax Company containing data for the last two years is as follows:

Lomax Company Comparative Balance Sheet
	This Year		Last Year
Assets
Current assets:
Cash and cash equivalents	$	80,000	$	57,200
Accounts receivable		608,000		632,500
Inventory		618,800		429,000
Prepaid expenses		17,200		9,500
Total current assets		1,324,000		1,128,200
Property, plant, and equipment		2,415,000		1,836,000
Less accumulated depreciation		625,800		568,100
Net property, plant, and equipment		1,789,200		1,267,900
Long-term investments		98,900		157,000
Loans to subsidiaries		129,000		74,500
Total assets	$	3,341,100	$	2,627,600
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	884,400	$	579,000
Accrued liabilities		30,400		50,100
Income taxes payable		144,700		125,200
Total current liabilities		1,059,500		754,300
Bonds payable		665,000		427,000
Total liabilities		1,724,500		1,181,300
Stockholders equity:
Common stock		1,108,000		1,009,000
Retained earnings		508,600		437,300
Total stockholders equity		1,616,600		1,446,300
Total liabilities and stockholders' equity	$	3,341,100	$	2,627,600

The following additional information is available about the companys activities during this year:
a.	The company declared and paid a cash dividend this year.
b.	Bonds with a principal balance of $389,000 were repaid during this year.
c.	Equipment was sold during this year for $74,500. The equipment had cost $148,000 and had $50,800 in accumulated depreciation on the date of sale.
d.	Long-term investments were sold during the year for $128,000. These investments had cost $58,100 when purchased several years ago.
e.	The subsidiaries did not repay any outstanding loans during the year.
f.	Lomax did not repurchase any of its own stock during the year.

The company reported net income this year as follows:

Sales			$	3,180,000
Cost of goods sold				1,971,600
Gross margin				1,208,400
Selling and administrative expenses				977,700
Net operating income				230,700
Nonoperating items:
Gain on sale of investments	$	69,900
Loss on sale of equipment		22,700		47,200
Income before taxes				277,900
Income taxes				89,000
Net income			$	188,900
Operating activities: Net income$188,900 Adjustments to convert net income to cash basis: Depreciation Decrease in accounts receivable Increase in inventory Increase in prepaid expenses Increase in accounts payable Decrease in accrued liabilities Increase in income taxes payable Loss on sale of equipment Gain on sale of investments0 Net cash provided by operating activities188,900 Investing activities:Proceeds from sale of long-term investments Proceeds from sale of equipmen Loan to subsidiaries Additions to plant and equipment Net cash used in investing activities0 Financing activities:Issuance of bonds payable Issuance of common stock Retirement of bonds payable Cash dividends to stockholders Net cash provided by financing activities0 Net increase in cash and cash equivalents188,900 Beginning cash and cash equivalents Ending cash and cash equivalents $188,900

Problem 14-14 Prepare and Interpret a Statement of Cash Flows [LO14-1, LO14-2] A comparative balance sheet for Lomax Company containing data for the last two years is as follows: Lomax Company Comparative Balance Sheet This Year Last Year Assets Current assets: Cash and cash equivalents $ 80,000 $ 57,200 Accounts receivable 608,000 632,500 Inventory 618,800 429,000 Prepaid expenses 17,200 9,500 Total current assets 1,324,000 1,128,200 Property, plant, and equipment 2,415,000 1,836,000 Less accumulated depreciation 625,800 568,100 Net property, plant, and equipment 1,789,200 1,267,900 Long-term investments 98,900 157,000 Loans to subsidiaries 129,000 74,500 Total assets $ 3,341,100 $ 2,627,600 Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 884,400 $ 579,000 Accrued liabilities 30,400 50,100 Income taxes payable 144,700 125,200 Total current liabilities 1,059,500 754,300 Bonds payable 665,000 427,000 Total liabilities 1,724,500 1,181,300 Stockholders equity: Common stock 1,108,000 1,009,000 Retained earnings 508,600 437,300 Total stockholders equity 1,616,600 1,446,300 Total liabilities and stockholders' equity $ 3,341,100 $ 2,627,600 The following additional information is available about the companys activities during this year: a. The company declared and paid a cash dividend this year. b. Bonds with a principal balance of $389,000 were repaid during this year. c. Equipment was sold during this year for $74,500. The equipment had cost $148,000 and had $50,800 in accumulated depreciation on the date of sale. d. Long-term investments were sold during the year for $128,000. These investments had cost $58,100 when purchased several years ago. e. The subsidiaries did not repay any outstanding loans during the year. f. Lomax did not repurchase any of its own stock during the year. The company reported net income this year as follows: Sales $ 3,180,000 Cost of goods sold 1,971,600 Gross margin 1,208,400 Selling and administrative expenses 977,700 Net operating income 230,700 Nonoperating items: Gain on sale of investments $ 69,900 Loss on sale of equipment 22,700 47,200 Income before taxes 277,900 Income taxes 89,000 Net income $ 188,900