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The income statement, balance sheets, and additional information for Video Phone

ID: 2483237 • Letter: T

Question

The income statement, balance sheets, and additional information for Video Phones, Inc., are provided.   

VIDEO PHONES, INC.
Income Statement
For the Year Ended December 31, 2018
  Net sales $ 3,236,000
  Expenses:
       Cost of goods sold $ 2,100,000  
       Operating expenses 888,000  
       Depreciation expense 30,000  
       Loss on sale of land 8,300  
       Interest expense 16,500
       Income tax expense 51,000


          Total expenses 3,093,800

  Net income $ 142,200

  

VIDEO PHONES, INC.
Balance Sheet
December 31
2018 2017
  Assets
  Current assets:
     Cash $ 226,580    $ 169,140   
     Accounts receivable 84,300    63,000   
     Inventory 105,000    138,000   
     Prepaid rent 12,720    6,360   
  Long-term assets:
     Investments 108,000    0   
     Land 213,000    246,000   
     Equipment 276,000    213,000   
     Accumulated depreciation (72,600) (42,600)

        Total assets $ 953,000    $ 792,900   

  Liabilities and Stockholders' Equity
  Current liabilities:
     Accounts payable $ 68,700    $ 84,000   
     Interest payable 6,300    10,600   
     Income tax payable 15,300    14,300   
  Long-term liabilities:
     Notes payable 291,000    228,000   
  Stockholders' equity:
     Common stock 330,000    330,000   
     Retained earnings 241,700    126,000   

        Total liabilities and stockholders’ equity $ 953,000    $ 792,900   

  

Additional Information for 2018:

1. Purchase investment in bonds for $108,000.
2. Sell land costing $33,000 for only $24,700, resulting in a $8,300 loss on sale of land.
3. Purchase $63,000 in equipment by borrowing $63,000 with a note payable due in three years. No cash is exchanged in the transaction.
4. Declare and pay a cash dividend of $26,500.

  
Required:

Prepare the statement of cash flows using the indirect method. Disclose any noncash transactions in an accompanying note.

Explanation / Answer

Answer:

Purchase $63,000 in equipment by borrowing $63,000 with a note payable due in three years. No cash is exchanged in the transaction. It is not disclosed.

VIDEO PHONES, INC Statement of Cash Flows Cash Flow from operating activities: Net income 142200 Adjustment: Depreciation exp 30000 Loss on sale of land 8300 Increase in accounts receivable -21300 Decrease in inventory 33000 Increase in prepaid exp -6360 Decrease in accounts payable -15300 Decrease in interest payable -4300 Increase in income tax payable 1000 Net cash Flow provided by operating activities 167240 Cash Flow From investing activities: Sale of land 24700 Purchase of investment -108000 Net cash Flow used in investing activities -83300 Cash Flow from financing activities: Cash Dividend Paid -26500 Net cash Flow used in financing activities -26500 Net increase or dec in cash 57440 Add: opening cash 169140 Closing cash 226580