Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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:

  1. Dividends of $60,254 were declared and paid during the year.
  2. Operating expenses include $52,600 of depreciation.
  3. 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.

Peoria Corp. Statement of Cash Flows For the Year Ended December 31, 2017
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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Using QuickBooks Accountant 2018 For Accounting

Authors: Glenn Owen

16th Edition

0357042085, 9780357042083

More Books

Students also viewed these Accounting questions