The income statement, balance sheets, and additional information for Video Phone
ID: 2536723 • Letter: T
Question
The income statement, balance sheets, and additional information for Video Phones, Inc., are provided.
Additional Information for 2018:
1. Purchase investment in bonds for $101,000.
2. Sell land costing $26,000 for only $18,400, resulting in a $7,600 loss on sale of land.
3. Purchase $56,000 in equipment by borrowing $56,000 with a note payable due in three years. No cash is exchanged in the transaction.
4. Declare and pay a cash dividend of $23,000.
Required:
Prepare the statement of cash flows using the indirect method. Disclose any noncash transactions in an accompanying note. (List cash outflows and any decrease in cash as negative amounts.)
Income Statement
For the Year Ended December 31, 2018 Net sales $ 2,816,000 Expenses: Cost of goods sold $ 1,750,000 Operating expenses 818,000 Depreciation expense 23,000 Loss on sale of land 7,600 Interest expense 13,000 Income tax expense 44,000 Total expenses 2,655,600 Net income $ 160,400
Explanation / Answer
Statement of Cash Flows For the Year Ended December 31, 2018 Cash Flows from Operating Activities: Net income 160400 Adjustments to reconcile net income to Net cash provided by operating activities Depreciation expense 23000 Loss on sale of land 7600 Increase in accounts receivables -20600 Decrease in inventory 26000 Increase in Prepaid rent -4920 Decrease in accounts payable -14600 Decrease in Interest payable -3600 Increase in Income tax payable 1000 13880 Net cash provided by operating activities 174280 Cash Flows from Investing Activities: Purchase of investment in bonds -101000 Sale of Land 18400 Net Cash Provided by Investing Activities -82600 Cash Flows from Financing Activities Payment of Cash Dividends -23000 Net Cash Used by Financing Activities -23000 Net Increase in Cash 68680 Cash at Beginning of Period 111080 Cash at End of Period 179760 Note: Noncash Activities Purchased Equipment by Issuance of Notes payable 56000
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