Accountants for Smithson,Inc have assembled the following data for the year ende

Question

Accountants for Smithson,Inc have assembled the following data for the year ended December 31,2016.

                                    2016             2015
Current Assets:
Cash                         $102,700.      $20,000
Accounts
Receivable                   63,500           69,500
Merchandise
Inventory                       85,000.         80,000
Current Liabilities:
Accounts Payable   $ 57,900.        $56,000
Income Tax Payable   14,400.        17,000

Transaction Data for 2016:
Issuance of common $42,000
stock for cash
Depreciation expense. 25,000
Purchase of equipment 73,000
with cash
Acquisition of land by.     118,000
issuing long term notes
payable
Book value of building      53,000
sold
Payment of notes payable 42,100
Payment of cash dividends 52,000
Issuance of notes payable 60,000
to borrow cash
Gain on sale of building.      4,000
Net income                            69,500

Prepare Smithson's statement of cash flows using the indirect method. Include an accompanying schedule of non cash investing and financing activities.

Explanation / Answer

Smithson Inc.

Statement of cash flows for the year ended December 31 2016: Indirect Method

Schedule for non cash activities:

$ $ Cash flows from operating activities Net income before income taxes 83,900 Adjustments for non-cash/ non-operating items Depreciation expense 25,000 Gain on sale of building ( 4,000) 21,000 Operating profit before working capital changes 104,900 Decrease in accounts receivable 6,000 Increase in merchandise inventory (5,000) Increase in accounts payable 1,900 2,900 Cash profit before income taxes 107,800 Income taxes paid (17,000) Net cash flows from operating activities 90,800 Cash flows from investing activities: Cash received from sale of building 57,000 Cash payment for purchase of equipment (73,000) Net cash used for investing activities (16,000) Cash flows from financing activities: Payments of notes payable (42,100) Payment of cash dividends (52,000) Issuance of notes payable 60,000 Issuance of common stock 42,000 Net cash flows from financing activities 7,900 Increase in cash 82,700 Cash Balance, December 31 2015 20,000 Cash Balance, December 31 2016 102,700

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.