The comparative statements of financial position of Mikos Inc. as at December 31
ID: 2514210 • Letter: T
Question
The comparative statements of financial position of Mikos Inc. as at December 31, 2017 and 2018, and its statement of earnings for the year ended December 31, 2018, are presented below: MIKOS INC. Comparative Statements of Financial Position December 31 2018 2017 Assets Cash $ 10,500 $ 18,500 Short-term investments 70,500 39,500 Accounts receivable 75,500 32,000 Inventories, at cost 57,000 41,500 Prepaid expenses 5,500 9,000 Land 51,000 77,500 Property, plant, and equipment, net 286,000 186,500 Intangible assets 25,500 31,000 $ 581,500 $ 435,500 Liabilities and Shareholders’ Equity Accounts payable $ 18,500 $ 43,000 Income tax payable 9,000 2,500 Accrued liabilities 11,500 -0- Long-term notes payable 125,000 180,000 Contributed capital 230,000 67,500 Retained earnings 187,500 142,500 $ 581,500 $ 435,500 MIKOS INC. Statement of Earnings For the Year Ended December 31, 2018 Sales $ 895,000 Cost of sales $ 445,000 Amortization expense—intangible assets 5,500 Depreciation expense—property, plant, and equipment 34,500 Operating expenses 236,000 Interest expense 13,500 734,500 Earnings before income taxes 160,500 Income tax expense 48,150 Net earnings $ 112,350 Additional information is as follows: a. Land was sold for cash at its carrying amount. b. The short-term investments will mature in February 2019. c. Cash dividends were declared and paid in 2018. d. New equipment with a cost of $167,500 was purchased for cash, and old equipment was sold at its carrying amount. e. Long-term notes of $17,500 were paid in cash, and notes of $37,500 were converted to shares. Required: 1. Prepare a statement of cash flows for Mikos Inc. for the year ended December 31, 2018 by using the indirect method. (Negative answers should be indicated by a minus sign.)
Explanation / Answer
Ans. Cash flow statement of Mikos Inc for the year ended Dec 2018
Indirect Method
Cashflow from Operating Activities $
Net Profit 112350
Add: Amoritisation exp. 5500
Depreciation exp. 34500
Adjustment of Current assets
Increase of Receivable (43500)
Increase of Inventories (15500)
Decrease of Prepaid exp. 3500
Decrease of account payable (24500)
Increase of IncomeTax payable 6500
Increase of Accured Liabilities paid 11500
Cash flow from Operating activies (A) 90350
Cash flow from Investing Activities
Purchasing of Investment (70500-39500) (31000)
Sale of Equipment * 33500
Purchase of new equipment (167500)
Sale of land 26500
cash flow from Investing activities (B) (138500)
Cash flow from Financing activities
Dividend payment (142500+112350-187500) (67350)
Payment of long term debt (17500)
Issued of share capital (67500+37500-230000) 125000
Cash flow from financial activities (C) 40150
Net cash flow for the year (A+B+C) (8000)
cash balance at opening 18500
Closing cash balance at the end of 2018 10500
*Calculation of value of new equipment purchase
Closing Balance of equipment = 286000
Add: Depreciation charge during the yr = 34500
Sale of equipment (difference amt) = 33500
354000
opening balance = 186500
Purchase during the yr = 167500
Total = 354000
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