Sharp Company Comparative Balance Sheet Additional Data: Net income for the year

Question

Sharp Company

Comparative Balance Sheet

Additional Data:

Net income for the year amounted to $134,000.

Cash dividends were paid amounting to 6% of par value.

Land was sold for $130,000.

Sharp sold equipment, which cost $225,000 and had accumulated depreciation of $90,000, for $115,000.

Instructions

Prepare a statement of cash flows using the indirect method.

December 31 December 31 2018 2017 Cash $     59,000 $     36,000 Accounts recievable, net 53,000 57,000 Inventory 156,000 123,000 Land 180,000 285,000 Buildings 300,000 300,000 Accumulated depreciation - building (75,000) (60,000) Equipment 1,565,000 900,000 Accumulated depreciation—equipment (177,000)    (141,000) $2,061,000 $1,500,000 Accounts payable $   202,000 $ 150,000 Bonds payable 450,000 -0- Capital stock, $10 par 1,250,000 1,250,000 Retained earnings      159,000      100,000 $2,061,000 $1,500,000

Explanation / Answer

Answers

Land Beginning Balance

$              2,85,000.00

Land Ending Balance

$              1,80,000.00

Land Sold

$              1,05,000.00

Land Sold for

130000

Gain on Sale of Land

$                 25,000.001

Accumulated Depreciation-Building

Accumulated Depreciation-Equipment

Ending Balance

$                 75,000.00

177000

Add: Accumulated depreciation on asset sold

$                                 -  

90000

Less: Beginning Balance

$                 60,000.00

141000

Depreciation expense

$                 15,000.002

1260002

Equipment

Ending Balance

$           15,65,000.00

Add: Equipment sold

$              2,25,000.00

Less: Beginning Balance

$              9,00,000.00

Equipment purchased

$              8,90,000.003

A. Cash Flows from Operating Activity

Net Income

$         1,34,000.00

Adjustments

Depreciation expense [15000 + 126000]

$            1,41,000.002

Gain on Sale of Land

$             (25,000.00)1

Loss on sale of Equipment [225000 - 90000 - 115000]

$               20,000.00

Increase in Accounts payable

$               52,000.00

Decrease in Accounts receivables

$                  4,000.00

Increase in Inventory

$             (33,000.00)

$         1,59,000.00

Net cash flow from Operating activities

$         2,93,000.00

B. Cash flows from Investing Activities

Land Sold

$            1,30,000.00

Equipment Sold

$            1,15,000.00

Equipment Purchased

$         (8,90,000.00)3

Net Cash flows from Investing activities

$      (6,45,000.00)

C. Cash Flows from Financing activities

Bonds Issued

$            4,50,000.00

Cash dividend paid [1250000 * 6%]

$             (75,000.00)

Cash flows from Financing activities

$         3,75,000.00

Net Increase (Decrease) in Cash [A+B+C]

$            23,000.00

Cash at the beginning

$            36,000.00

Cash at the end

$            59,000.00

Land Beginning Balance

$              2,85,000.00

Land Ending Balance

$              1,80,000.00

Land Sold

$              1,05,000.00

Land Sold for

130000

Gain on Sale of Land

$                 25,000.001

Accumulated Depreciation-Building

Accumulated Depreciation-Equipment

Ending Balance

$                 75,000.00

177000

Add: Accumulated depreciation on asset sold

$                                 -  

90000

Less: Beginning Balance

$                 60,000.00

141000

Depreciation expense

$                 15,000.002

1260002

Equipment

Ending Balance

$           15,65,000.00

Add: Equipment sold

$              2,25,000.00

Less: Beginning Balance

$              9,00,000.00

Equipment purchased

$              8,90,000.003

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