The comparative balance sheets for 2015 and 2016 and the statement of income are

Question

The comparative balance sheets for 2015 and 2016 and the statement of income are given below for Big Company. Additional information from Big’s accounting records is provided also.

Big Company

Balance Sheets

                                2016                                       2015

Cash                      114 100

Accts rec 192 161

Inventory 145 140

Land                      106                                         130

Ppe                        710                                         540

a/d ppe (199) (145)

accts pay              42                                           49

salary pay            5                                              7

interest pay        7                                              6

tax pay                 7                                              11

lt note pay          0                                              34

bond pay             308                                         240

comm stock        405                                         340

apic                        190                                         170

r/e                          104                                         69

INCOME STATEMENT

BIG CO.

FOR THE YEAR 2016

SALES 600

COGS 270

SALARY EXP 66

DEPRECIATION EXP 54

INTEREST EXP 17

LOSS ON SALE LAND 4

INCOME TAX EXP 89

TOTAL EXP 500

INCOME 100

ADDITIONAL INFORMATION:

THERE WAS ONLY 1 TRANSACTION INVOLVING LAND THIS YEAR

THERE WAS ONLY 1 PURCHASE OF PPE THIS YEAR

THE LT NOTE WAS PAID AT MATURITY ON JAN. 1 2016

THE BONDS WERE ISSUED AT FACE VALUE

THERE WAS ONLY 1 COMMON STOCK TRANSACTION (HINT: IT SOLD ABOVE PAR)

THE COMPANY PAID A DIVIDEND

REQUIRED: PREPARE A STATEMENT OF CASH FLOWS, YOU MAY USE EITHER THE DIRECT OR INDIRECT METHOD FOR CASH FROM OPERATIONS?

Explanation / Answer

Solution:

Cashflow Statement Cash flow from Operations Net Income 100 Add: Depreciation 54 Add: Interest Expense 17 Add: Loss on sale of Land 4 Add: Income Tax Payable 89 264 Working Capital Changes Increase in accounts receivables -31 Increase in inventory -5 Decrease in accounts payable -7 Salaries payable -2 Cash flow from Operations 219 Less: Tax paid 93 Cash flow from Operations 126 Cash flow from investing activities Sale of Land 20 Purchase of PPE -170 Cash flow from investing activities -150 Cash flow from Financing activities Interest paid -16 Dividend Paid -65 Logterm Bonds redeemed -34 Issue of bonds 68 Issue of common stock 85 Cash flow from Financing activities 38 Beginning Cash 100 Add: Changes in cash 14 Cash in the end 114

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