Statement of Cash Flows (Indirect Method) The Towne Company's income statement and comparative balance sheets as of December 31 of 2016 and 2015 follow: TOWNE COMPANY Income Statement For the Year Ended December 31, 2016 Service Fees Earned $317,000 14,000 $331,000 Dividend and Interest Income Wages and Other Operating Expenses Depreciation Expense Franchise Amortization Expense Loss on Sale of Equipment Gain on Sale of Investments $285,000 55,000 10,000 7,000 (17,000) 340,000 $(9,000) Net Loss TOWNE COMPANY Balance Sheets Dec. 31, 2016 Dec. 31, 2015 Assets Cash Accounts Receivable Interest Receivable Prepaid Expenses Long-term Investments-Available for Sale Fair Value Adjustment to Investments Plant Assets Accumulated Depreciation Franchise $43,000 $33,000 18,000 4,000 10,000 70,000 10,000 655,000 (185,000) 29,000 $644,000 13,000 16,000 696,000 (237,000) 91,000 $622,000 Total Assets Liabilities and Stockholders' Equity Accrued Liabilities Notes Payable Common Stock ($10 par value) Retained Earnings Unrealized Gain on Investments Treasury Stock Total Liabilities and Stockholders' Equity $12,000 $14,000 26,000 535,000 59,000 10,000 595,000 35,000 (20,000) $622,000 $644,000 During the year, the following transactions occurred 1. Sold equipment for $9,000 cash that originally cost $19,000 and had $3,000 accumulated depreciation 2. Sold long-term investments that had cost $70,000 for $87,000 cash. Unrealized gains totaling $10,000 related to these investments had been recorded in earlier years. At year-end, the fair value adjustment and unrealized gain account balances were eliminated 3. Paid cash to extend the company's exclusive franchise for another three years 4. Paid off a note payable at the bank on January 1. 5. Declared and paid a $15,000 dividend 6. Purchased treasury stock for cash 7. Acquired land valued at $60,000 by issuing 6,000 shares of common stock. Required a. Compute the change in cash that occurred in 2016 b. Prepare a statement of cash flows using the indirect method a. Change in Cash during 2016$ b. Use a negative sign with cash outflow answers TOWNE COMPANY Statement of Cash Flows For Year Ended December 31, 2016 Cash Flow from Operating Activities Net Loss Add (deduct) items to convert net income to cash basis Depreciation Franchise Amortization Loss on Sale of Equipment Gain on Sale of Investments Accounts Receivable Interest Receivable Prepaid Expenses Accrued Liabilities Cash Provided by Operating Activities Cash Flow from Investing Activities Sale of Equipment Sale of Investments Extension of Franchise Cash Provided by Investing Activities Cash Flow from Financing Activities Payment of Notes Payable Payment of Dividends Purchase of Treasury Stock Cash Used by Financing Activities Net in Cash Cash at Beginning of Year Cash at End of Year
