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The following information is available for the Ehrens Corporation: Ehrens Corpor

ID: 2450085 • Letter: T

Question

The following information is available for the Ehrens Corporation:

Ehrens Corporation

Balance Sheets

At December 31

2014

2013

Assets:

   Cash............................................................................

$ 27,040

$ 25,440

   Accounts receivable.....................................................

29,400

32,180

   Merchandise inventory................................................

70,625

59,710

   Long-term investments...............................................

56,000

56,000

   Equipment...................................................................

175,500

145,500

   Accumulated depreciation............................................

(33,550

)

(31,200

)

Total assets....................................................................

$325,015

$287,630

Liabilities:

   Accounts payable.........................................................

$ 62,745

$ 42,635

   Salaries payable............................................................

10,200

10,725

   Long Term Bonds payable...........................................

    48,750

    66,000

Total liabilities...............................................................

$121,695

$119,360

Equity:

   Common stock............................................................

117,000

96,000

   Paid-in capital in excess of par....................................

13,000

9,000

   Retained earnings.........................................................

73,320

    63,270

Total equity....................................................................

$203,320

$168,270

Total liabilities and equity...............................................

$325,015

$287,630

Ehrens Corporation

Income Statement

For Year Ended December 31, 2014

Sales.............................................................

$240,000

Cost of goods sold.........................................

$80,900

Depreciation expense...................................

29,400

Other operating expenses.............................

48,000

Interest expense...........................................

    2,000

(160,300

)

Other gains (losses):

   Loss on sale of equipment..........................

    (8,400

)

Income before taxes.....................................

71,300

Income taxes expense...................................

    27,650

Net income...................................................

$ 43,650

Additional information:
(1) Received cash for the sale of equipment that had cost $37,550 yielding an $8,400 loss.
(2) New equipment was purchased for $67,550 cash.
(3) Cash dividends were paid.
(4) Additional shares of stock were issued for cash.

Prepare a statement of cash flows.

Ehrens Corporation

Balance Sheets

At December 31

2014

2013

Assets:

   Cash............................................................................

$ 27,040

$ 25,440

   Accounts receivable.....................................................

29,400

32,180

   Merchandise inventory................................................

70,625

59,710

   Long-term investments...............................................

56,000

56,000

   Equipment...................................................................

175,500

145,500

   Accumulated depreciation............................................

(33,550

)

(31,200

)

Total assets....................................................................

$325,015

$287,630

Liabilities:

   Accounts payable.........................................................

$ 62,745

$ 42,635

   Salaries payable............................................................

10,200

10,725

   Long Term Bonds payable...........................................

    48,750

    66,000

Total liabilities...............................................................

$121,695

$119,360

Equity:

   Common stock............................................................

117,000

96,000

   Paid-in capital in excess of par....................................

13,000

9,000

   Retained earnings.........................................................

73,320

    63,270

Total equity....................................................................

$203,320

$168,270

Total liabilities and equity...............................................

$325,015

$287,630

Explanation / Answer

Ehrens Corporation Statement of Cashflow Cash flow from operations (Indirect method) Net Income $   43,650 Add: Non cash items Loss on sale of equipment $             8,400 Depreciation expense $           29,400 $   37,800 Changes in working Capital decrease in Accounts Receivable $             2,780 Increase in Inventories $         -10,915 Increase in Accounts payable $           20,110 Decrease in salaries payable $               -525 $   11,450 Cashflow from Operations (A) $   92,900 Cash Flow from Investing Activities Cash received on sale of equipment (W.N 1) $             2,100 Purchase of new equipment $         -67,550 Net cashflow from Investing activities (B) $ -65,450 Cashflow from Financing Activities Issue of additional shares of stock $           21,000 Increase in share premium(in excess of par) $             4,000 Cash dividends paid (Increase in retained earnings - net income) $         -33,600 Decrease in Long term bonds payable $         -17,250 Net Cash Inflow from Financing Activities (.C) $ -25,850 Net cashflows (A)+ (B)+(.C) $     1,600 Opening Cash $   25,440 Closing Cash $   27,040 W.N 1 Cash value of sale of equipment Gross Accumulated depreciation Opening 145500 31200 Add additions 67550 29400 Total 213050 60600 Less Closing Balance 175500 33550 Assets sold 37550 27050 Net cost of assets sold (Gross- Accumulated depreciation) 10500 Loss on sale of assets 8400 Cash received on sale of assets 2100