Problem 23-5 You have completed the field work in connection with your audit of Vaughn Corporation for the year ended December 31, 2017. The balance sheet accounts at the beginning and end of the year are shown below Dec. 31 2017 Dec. 31 2016 Increase or (Decrease) $348,660 413,010 713,700 9,360 ($23,517) as Accounts receivable Inventory Prepaid expenses Investment in subsidiary Cash surrender value of life insurance Machinery Buildings $325,143 549,226 867,789 14,040 129,285 2,696 242,190 626,184 61,425 80,730 46,800 5,267 136,216 154,089 4,680 129,285 590 19,890 148,941 2,106 222,300 477,243 61,425 74,880 58,500 Patents Copyrights Bond discount and issue cost 5,850 (11,700 ) 5,267 $2,950,775 $2,381,18-4 $569,591 $105,592 350,158 81,900 146,250 Income taxes payable Accounts payable Dividends payable Bonds payable-8% Bonds payable-12% Allowance for doubtful accounts Accumulated depreciation-buildings Accumulated depreciation-machinery Premium on bonds payable Common stock-no par Paid-in capital in excess of par-common stock Retained earnings-unappropriated $12,460 22,558 81,900 146,250 (117,000 ) $93,132 327,600 117,000 46,800 468,000 152,100 2,808 1,700,244 (5,499 ) 41,301 496,080 202,410 28,080 50,310 (2,808) 1,376,154 127,530 23,400 (324,090 ) 127,530 549,900 $569,591 (526,500) $2,950,775 $2,381,18-4 1, 2017 31, 2017 1, 2017 STATEMENT OF RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31, 2017 Balance (deficit) Net income for first quarter of 2017 Transfer from paid-in capital $(526,500) 29,250 497,250 January March Balance Net income for last three quarters of 2017 Dividend declared-payable January 21, 2018 31, 2017 105,300 (81,900 $23,400 December Balance 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, 34,632 shares of no-par stock were sold for $300,690. The board of directors voted to regard $5 per share as stated capital 3. A patent was purchased for $17,550 4. During the year, machinery that had a cost basis of $19,188 and on which there was accumulated depreciation of $6,084 was sold for $10,530. No other plant assets were sold during the year. 5. The 12%, 20-year bonds were dated and issued on January 2, 2005, Interest was payable on June 30 and December 31. They were sold originally at 106. These bonds were redeemed at 100.9 plus accrued interest on March 31, 2017 6. The 8%, 40-year bonds were dated January 1, 2017, and were sold on March 31 at 97 plus accrued interest Interest is payable semiannually on June 30 and December 31. Expense of issuance was $982 7. Vaughn Corporation acquired 70% control in Crimson Company on January 2, 2017, for $117,000. The income statement of Crimson Company for 2017 shows a net income of $17,550 8. Major repairs to buildings of $8,424 were charged to Accumulated Depreciation-Buildings 9. Interest paid in 2017 was $12,285 and income taxes paid were $39,780 From the information given, prepare a statement of cash flows using the indirect method. A worksheet is not necessary, but the principal computations should be supported by schedules or general ledger accounts. The company uses straight-line amortization for bond interest. (Round answers to 0 decimal places, e.g. 2,500 Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).) VAUGHN CORPORATION Statement of Cash Flows Indirect Method) Adjustments to reconcile net income to Supplemental discdlosures of cash flow information Problem 23-5 You have completed the field work in connection with your audit of Vaughn Corporation for the year ended December 31, 2017. The balance sheet accounts at the beginning and end of the year are shown below Dec. 31 2017 Dec. 31 2016 Increase or (Decrease) $348,660 413,010 713,700 9,360 ($23,517) as Accounts receivable Inventory Prepaid expenses Investment in subsidiary Cash surrender value of life insurance Machinery Buildings $325,143 549,226 867,789 14,040 129,285 2,696 242,190 626,184 61,425 80,730 46,800 5,267 136,216 154,089 4,680 129,285 590 19,890 148,941 2,106 222,300 477,243 61,425 74,880 58,500 Patents Copyrights Bond discount and issue cost 5,850 (11,700 ) 5,267 $2,950,775 $2,381,18-4 $569,591 $105,592 350,158 81,900 146,250 Income taxes payable Accounts payable Dividends payable Bonds payable-8% Bonds payable-12% Allowance for doubtful accounts Accumulated depreciation-buildings Accumulated depreciation-machinery Premium on bonds payable Common stock-no par Paid-in capital in excess of par-common stock Retained earnings-unappropriated $12,460 22,558 81,900 146,250 (117,000 ) $93,132 327,600 117,000 46,800 468,000 152,100 2,808 1,700,244 (5,499 ) 41,301 496,080 202,410 28,080 50,310 (2,808) 1,376,154 127,530 23,400 (324,090 ) 127,530 549,900 $569,591 (526,500) $2,950,775 $2,381,18-4 1, 2017 31, 2017 1, 2017 STATEMENT OF RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31, 2017 Balance (deficit) Net income for first quarter of 2017 Transfer from paid-in capital $(526,500) 29,250 497,250 January March Balance Net income for last three quarters of 2017 Dividend declared-payable January 21, 2018 31, 2017 105,300 (81,900 $23,400 December Balance 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, 34,632 shares of no-par stock were sold for $300,690. The board of directors voted to regard $5 per share as stated capital 3. A patent was purchased for $17,550 4. During the year, machinery that had a cost basis of $19,188 and on which there was accumulated depreciation of $6,084 was sold for $10,530. No other plant assets were sold during the year. 5. The 12%, 20-year bonds were dated and issued on January 2, 2005, Interest was payable on June 30 and December 31. They were sold originally at 106. These bonds were redeemed at 100.9 plus accrued interest on March 31, 2017 6. The 8%, 40-year bonds were dated January 1, 2017, and were sold on March 31 at 97 plus accrued interest Interest is payable semiannually on June 30 and December 31. Expense of issuance was $982 7. Vaughn Corporation acquired 70% control in Crimson Company on January 2, 2017, for $117,000. The income statement of Crimson Company for 2017 shows a net income of $17,550 8. Major repairs to buildings of $8,424 were charged to Accumulated Depreciation-Buildings 9. Interest paid in 2017 was $12,285 and income taxes paid were $39,780 From the information given, prepare a statement of cash flows using the indirect method. A worksheet is not necessary, but the principal computations should be supported by schedules or general ledger accounts. The company uses straight-line amortization for bond interest. (Round answers to 0 decimal places, e.g. 2,500 Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).) VAUGHN CORPORATION Statement of Cash Flows Indirect Method) Adjustments to reconcile net income to Supplemental discdlosures of cash flow information