Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The comparative balance sheets of Posner Company, for Years 1 and 2 ended December 31, appear below in condensed form: Year 2 Year 1 Assets
The comparative balance sheets of Posner Company, for Years 1 and 2 ended December 31, appear below in condensed form:
Year 2 | Year 1 | |
Assets | ||
Cash | $ 53,000 | $50,000 |
Accounts receivable (net) | 37,000 | 48,000 |
Inventories | 108,500 | 100,000 |
Investments | - | 70,000 |
Equipment | 573,200 | 450,000 |
Accumulated depreciationequipment | (142,000) | (176,000) |
Total assets | $629,700 | $542,000 |
Liabilities and Stockholders' Equity | ||
Accounts payable | $ 62,500 | $43,800 |
Bonds payable, due Year 2 | - | 100,000 |
Common stock, $10 par | 325,000 | 285,000 |
Paid-in capital in excess of parcommon stock | 80,000 | 55,000 |
Retained earnings | 162,200 | 58,200 |
Total liabilities and stockholders' equity | $629,700 | $542,000 |
The income statement for the current year is as follows:
Sales | $625,700 | ||
Cost of goods sold | 340,000 | ||
Gross profit | $285,700 | ||
Operating expenses: | |||
Depreciation expense | $ 26,000 | ||
Other operating expenses | 68,000 | ||
Total operating expenses | 94,000 | ||
Income from operations | $191,700 | ||
Other income: | |||
Gain on sale of investment | $4,000 | ||
Other expense: | |||
Interest expense | 6,000 | (2,000) | |
Income before income tax | $189,700 | ||
Income tax | 60,700 | ||
Net income | $129,000 |
Additional data for the current year are as follows:
- Fully depreciated equipment costing $60,000 was scrapped, no salvage, and new equipment was purchased for $183,200.
- Bonds payable for $100,000 were retired by payment at their face amount.
- 5,000 shares of common stock were issued at $13 for cash.
- Cash dividends declared and paid, $25,000.
Prepare a statement of cash flow, using the indirect method of reporting cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.
Posner Company | ||
Statement of Cash Flows | ||
For the Year Ended December 31, Year 2 | ||
Cash flows from operating activities: | ||
$ | ||
Adjustments to reconcile net income to net cash flow from operating activities: | ||
Changes in current operating assets and liabilities: | ||
Net cash flow from operating activities | $ | |
Cash flows from investing activities: | ||
$ | ||
Net cash flow used for investing activities | ||
Cash flows from financing activities: | ||
$ | ||
Net cash flow used for financing activities | ||
$ | ||
Cash at the beginning of the year | ||
Cash at the end of the year | $ |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started