Jacobson Manufacturing Corporation earned $96,000 in profit during 2017. Machine
ID: 2529093 • Letter: J
Question
Jacobson Manufacturing Corporation earned $96,000 in profit during 2017. Machinery was sold for $126,000 and a $36,000 loss on the sale was recorded. Machinery purchases totalled $395,000 including a July purchase for which an $148,000 promissory note was issued. Bonds were retired at their face value, and the issuance of new common shares produced an infusion of cash. Jacobson’s comparative balance sheets were as follows:
Required: (Enter amounts in thousands, as per balance sheet above. List any deduction in cash and cash outflows and loss as negative amounts.)
1. What was Jacobson’s depreciation expense in 2017?
2. What was the amount of cash flow from operating activities?
3. What was the amount of cash flow from investing activities?
4. What was the amount of dividends declared? paid?
5. By what amount would you expect the total inflows of cash to differ from the total outflows of cash?
6. What was the amount of cash flow from financing activities?
Explanation / Answer
Solution (1):
Jacobson’s depreciation expense in 2017 is $ 123. Calculation is given below.
Machinery
Particulars
Debit Amount in 000’s ($)
Particulars
Credit Amount in 000’s ($)
Beginning Balance
2,110
Cash Sale
126
Machinery Purchased:
Notes: 148
Cash: 247
395
Loss on sale of machinery
36
Accumulated Depreciation on machinery sold
(Balancing Figure)
143
Ending Balance
2,200
Total
2,505
Total
2,505
Accumulated Depreciation
Particulars
Debit Amount in 000’s ($)
Particulars
Credit Amount in 000’s ($)
Beginning Balance
380
Machinery Account (Accumulated Depreciation on furniture sold)
(Transferred from Machinery account)
143
Income Statement (Depreciation expense- 2017)
(Balancing figure)
123
Ending Balance
360
Total
503
Total
503
Solution (2):
The amount of cash flow from operating activities $ 294.
Particulars
Amount in thousands ($)
Amount in thousands ($)
CASH FLOW FROM OPERATING ACTIVITIES
Net Income
96
Adjustments to reconcile net income to operating cash flow
Income statement items not affecting cash
Add: Depreciation expense
123
Add: Loss in sale of machinery
36
Changes in current operating assets and liabilities
Add: Decrease in Accounts Receivable ($ 358 - $ 281)
77
Less: Increase in Merchandise Inventory ($ 460 - $ 395)
(65)
Add: Increase in Notes Payable ($ 408 - $ 295)
113
Add: Increase in Dividends Payable ($ 66 - $ 54)
12
Less: Decrease in Accounts Payable ($ 813 - $ 715)
(98)
198
Net Cash provided by operating activities
294
Solution (3):
The amount of cash used in investing activities is ($ 121).
Particulars
Amount in thousands ($)
Amount in thousands ($)
CASH FLOW FROM INVESTING ACTIVITIES
Machine Purchased for cash (Refer solution 1)
(247)
Machine Sold for cash (Given)
126
Net Cash used in investing activities
(121)
Solution (4):
The amount of dividend declared is $ 64
The amount of dividend paid is $ 52
Retained Earnings
Particulars
Debit Amount in 000’s ($)
Particulars
Credit Amount in 000’s ($)
Dividend paid (Balancing Figure)
52
Beginning Balance
355
Net Income (2017)
96
Ending Balance
399
Total
451
Total
451
Dividend Payable
Particulars
Debit Amount in 000’s ($)
Particulars
Credit Amount in 000’s ($)
Dividend paid (Transferred from retained earning account)
52
Beginning Balance
54
Ending Balance
66
Dividend declared- 2017
(Balancing figure)
64
Total
118
Total
118
Solution (5):
The amount of total inflows of cash
= Decrease in Accounts Receivable + Increase in Notes Payable+ Increase in Dividends Payable+ Machine Sold for cash (Given) + Issue of common shares
= $ 77+$ 113 + $ 12 +$ 126 + 190
= $ 518
The amount of total outflows of cash
= Increase in Merchandise Inventory + Decrease in Accounts Payable + Machine Purchased for cash+ Retirement of bonds+ Dividend paid
=$ 65 + $ 98 + $ 247 + $ 109 + $ 52
=$ 571
The amount expected the total inflows of cash to differ from the total outflows of cash is
= $ 571 - $ 518
= $ 53
Solution (6):
The amount of cash flow from financing activities is $ 29.
Particulars
Amount in thousands ($)
Amount in thousands ($)
CASH FLOW FROM FINANCING ACTIVITIES
Issue of common shares ($ 920 -$ 730)
190
Retirement of bonds ($ 371 - $ 262)
(109)
Dividend paid (Refer solution 4)
(52)
Net Cash provided by financing activities
29
Particulars
Debit Amount in 000’s ($)
Particulars
Credit Amount in 000’s ($)
Beginning Balance
2,110
Cash Sale
126
Machinery Purchased:
Notes: 148
Cash: 247
395
Loss on sale of machinery
36
Accumulated Depreciation on machinery sold
(Balancing Figure)
143
Ending Balance
2,200
Total
2,505
Total
2,505
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