Question 4

During the current year, M&Q Entertainment sold assets for $20,460,000 cash and recorded a gain on disposal of $18,980,000, which was included in the companys net income of $43,840,000.

Required:

1. Show how the disposal would be reported on the statement of cash flows, using the following format (which assumes the indirect method): (Enter your answers in thousands. Amounts to be deducted should be indicated by a minus sign.)

(in thousands)

Cash flows from operating activities

Net income $43,840

Cash flows from investing activities

2. Compute the book value of the assets that were sold. (Enter your answer in thousands.)

Question 5: During a recent year (ended December 31, 2017), Nicoles Getaway Spa (NGS) reported net income of $2,640. The company reported the following activities:

Increase in inventories of $725.

Depreciation of $3,300.

Increase of $3,090 in prepaid expenses.

Payments of $6,650 on long-term debt.

Purchased new spa equipment for $7,715.

Payments on accounts payable exceeded purchases by $770.

Collections on accounts receivable exceeded credit sales by $923.

Issued $16,500 of common shares.

Required:

Based on this information, prepare a statement of cash flows for the year ended December 31, 2017, using the indirect method. Assume the cash balance at December 31, 2016, was $7,700. (Amounts to be deducted should be indicated by a minus sign.)

NICOLES GETAWAY SPA

Statement of Cash Flows

For the year ended December 31, 2017

Cash flows from operating activities

Changes in current assets and current liabilities

0

Cash flow from investing activities

0

Cash flow from financing activities

0

Net change in cash

Beginning cash, December 31, 2016

Ending cash, December 31, 2017 $0