Question One Lock & Key Inc. began operations on January 1, 2016. Its post-closi

Question

Question One Lock & Key Inc. began operations on January 1, 2016. Its post-closing trial balance at December 31, 2016, and 2017 is shown below along with some other information. Lock & Key Inc. Income Statement For Year Ended December 31, 2017 (000s) Lock & Key Inc. Post-Closing Trial Balance (000s) December 31- 2017 2016 Revenues: Account asan. $2,160 $1,260 Recevables. 2,100 1,440 Merchandise inventory2,040 2,280 Property, plant, and equipment.... 3,720 3,960 Accumulated depreclation. 1,440 1,380 Accounts payable. 1,440 1,080 Accrued llabilities.. Bonds payable 1,680 1,800 Common shares... Retained earnings... Sales 3,300 Cash. Cost of goods sold.. Gross Profit.uca 780 Expenses: Other expenses. Depreciation epens.240 Total expenses. 660 240 360 Lossu 3,084 ...2,136 2,040 2,280 Other information regarding Lock & Key Inc. and its activities during 2017 1. Assume all accounts have normal balances. 2. Cash dividends were declared and paid during the year. 3. Equipment was sold for cash equal to its book value. Using the information provided, prepare a statement of cash flows (applying the indirect method) for the year ended December 31, 2017

Explanation / Answer

Lock & Key Inc.

Statement of Cash Flows

For the year ended December 31, 2017

Equipment Account

Accumulated Depreciation Account

Calculation of cash dividends paid in 2017

Retained earnings in 2016 = 2,280 (000 $)

Less Net loss of 2017 = -120 (000 $)

Less retained earnings in 2017 = - 2,136 (000 $)

Hence, cash dividend paid = 2,280 - 120 - 2,136

= 24 (000 $)

I. Cash flows from operating activities Net loss -120 Add: Depreciation 240 Receivables - 660 Merchandise inventory 240 Accounts payable 360 Accrued liabilities -120 Net cash flows from operating activities - 60 II. Cash flows from Investing Activities Sale of equipment 60 Net cash flows from Investing Activities 60 III. Cash flows from Financing Activities Cash dividend paid - 24 Issue of Common shares 1,044 Repayment of Bonds payable - 120 Net cash flows from Financing Activities 900 Net increase in cash (I + II + III) 900 Add: Opening cash balance 1,260 Closing cash balance 2,160

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