Problem 23-3 Mortonson Company has not yet prepared a formal statement of cash f

Question

Problem 23-3 Mortonson Company has not yet prepared a formal statement of cash flows for the 2014 fiscal year. Comparative balance sheets as of December 31, 2013 and 2014, and a statement of income and retained earnings for the year ended December 31, 2014, are presented as follows MORTONSON COMPANY STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31, 2014 ($000 OMITTED) Sales revenue Expenses $3,899 $1,242 730 84 84 Cost of goods sold Salaries and benefits Heat, light, and power Depreciation Property taxes Patent amortization Miscellaneous expenses Interest 26 13 2,234 1,665 833 832 320 1,152 605 $547 Income before income taxes Income taxes Net income Retained earnings-Jan. 1, 2014 Stock dividend declared and issued Retained earnings-Dec. 31, 2014

Explanation / Answer

Amount Amount Cash flow from operating Activity: Cash received from customers = Net sales – Increase in accounts receivable = 3,899 - 255 3,644 cash payment for merchandise = cost of goods sold + increase in the inventory - Increase in accounts payable = 1,242 + 155 - 70 -1,327 Cash payment for salaries and benefits -730 Cash payment for heat, light and power -84 Cash payment for property Taxes -22 Cash payment for Interest -33 Cash payment for miscellaneous -13 Cash payment for Income Taxes = income tax expenses - increase in income tax payable = 833 - 15 -818 Net Cash flow from operating Activity: 617 Cash flow from Investing Activity: Sale of investments = 63 - 11 52 Purchase of building and equipment = 915-615 -300 Purchase of Land = 165 - 66 -99 Net Cash flow from Investing Activity: -347 Net increase in cash 270 Cash, January 1, 2014 150 Cash, December 31, 2014 420

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