Question
Statement of Cash FlowsDirect Method Peoria Corp. just completed another successful year, as indicated by the following income statement: For the Year Ended December 31,
Statement of Cash FlowsDirect Method
Peoria Corp. just completed another successful year, as indicated by the following income statement:
For the Year Ended December 31, 2017 | |
Sales revenue | $1,249,630 |
Cost of goods sold | 700,830 |
Gross profit | $548,800 |
Operating expenses | 148,670 |
Income before interest and taxes | $400,130 |
Interest expense | 24,490 |
Income before taxes | $375,640 |
Income tax expense | 150,256 |
Net income | $225,384 |
Presented here are comparative balance sheets:
December 31 | |||
2017 | 2016 | ||
Cash | $50,060 | $90,220 | |
Accounts receivable | 180,670 | 129,560 | |
Inventory | 231,270 | 200,480 | |
Prepayments | 15,350 | 25,950 | |
Total current assets | $477,350 | $446,210 | |
Land | $748,270 | $598,420 | |
Plant and equipment | 700,610 | 498,030 | |
Accumulated depreciation | (251,170) | (198,570) | |
Total long-term assets | $1,197,710 | $897,880 | |
Total assets | $1,675,060 | $1,344,090 | |
Accounts payable | $129,490 | $147,450 | |
Other accrued liabilities | 67,940 | 62,240 | |
Income taxes payable | 89,420 | 110,870 | |
Total current liabilities | $286,850 | $320,560 | |
Long-term bank loan payable | $350,980 | $300,900 | |
Common stock | $550,060 | $400,590 | |
Retained earnings | 487,170 | 322,040 | |
Total stockholders' equity | $1,037,230 | $722,630 | |
Total liabilities and stockholders' equity | $1,675,060 | $1,344,090 |
Other information is as follows:
- Dividends of $60,254 were declared and paid during the year.
- Operating expenses include $52,600 of depreciation.
- Land and plant and equipment were acquired for cash, and additional stock was issued for cash. Cash also was received from additional bank loans.
The president has asked you some questions about the year's results. She is very impressed with the profit margin of 18.04% (net income divided by sales revenue). She is bothered, however, by the decline in the company's cash balance during the year. One of the conditions of the existing bank loan is that the company maintain a minimum cash balance of $52,600.
Required:
1. Prepare a statement of cash flows for 2017 using the direct method in the Operating Activities section. Use the minus sign to indicate cash payments, cash outflows, or decreases in cash.
Cash Flows from Operating Activities | |
Accounts ReceivableCash collections from customersCredit sales to customersNet incomeNet lossRetained earningsCash collections from customers | $Cash collections from customers |
Cash payments for: | |
Acquisition of landAcquisition of plant and equipmentAdditional long-term borrowingsCash dividends paidIncrease in accounts payableInventoryInventory | $Inventory |
Acquisition of landAdditional long-term borrowingsCash dividends paidIncrease in accounts payableIssuance of common stockOperating expensesOperating expenses | Operating expenses |
Acquisition of landAcquisition of plant and equipmentAdditional long-term borrowingsIncrease in accounts payableInterestIssuance of common stockInterest | Interest |
Acquisition of landAcquisition of plant and equipmentAdditional long-term borrowingsIncome taxesIncrease in income taxes payableIssuance of common stockIncome taxes | Income taxes |
Total cash payments | $fill in the blank e32bc5076fe6ff8_11 |
Net cash provided by operating activitiesNet cash used by operating activitiesNet cash provided by operating activities | $Net cash provided by operating activities |
Cash Flows from Investing Activities | |
Acquisition of landAdditional long-term borrowingsCash dividends paidIncome taxesInventoryOperating expensesAcquisition of land | $Acquisition of land |
Acquisition of plant and equipmentAdditional long-term borrowingsInterestInventoryIssuance of common stockOperating expensesAcquisition of plant and equipment | Acquisition of plant and equipment |
Net cash provided by investing activitiesNet cash used by investing activitiesNet cash used by investing activities | $Net cash used by investing activities |
Cash Flows from Financing Activities | |
Acquisition of landAcquisition of plant and equipmentAdditional long-term borrowingsInterestInventoryRetained earningsAdditional long-term borrowings | $Additional long-term borrowings |
Acquisition of landAcquisition of plant and equipmentInterestInventoryIssuance of common stockRetained earningsIssuance of common stock | Issuance of common stock |
Acquisition of landCash dividends paidIncome taxesInventoryOperating expensesRetained earningsCash dividends paid | Cash dividends paid |
Net cash provided by financing activitiesNet cash used by financing activitiesNet cash provided by financing activities | $Net cash provided by financing activities |
Net decrease in cashNet increase in cashNet decrease in cash | $Net decrease in cash |
Cash balance, December 31, 2016 | fill in the blank e32bc5076fe6ff8_30 |
Cash balance, December 31, 2017 | $fill in the blank e32bc5076fe6ff8_31 |
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