Exercise 23-14 Ayayai Inc., a greeting card company, had the following statement
ID: 2542214 • Letter: E
Question
Exercise 23-14
Ayayai Inc., a greeting card company, had the following statements prepared as of December 31, 2017.
Additional information:
1.
Dividends in the amount of $5,900 were declared and paid during 2017.
2.
Depreciation expense and amortization expense are included in operating expenses.
3.
No unrealized gains or losses have occurred on the investments during the year.
4.
Equipment that had a cost of $20,000 and was 70% depreciated was sold during 2017.
Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
1.
Dividends in the amount of $5,900 were declared and paid during 2017.
2.
Depreciation expense and amortization expense are included in operating expenses.
3.
No unrealized gains or losses have occurred on the investments during the year.
4.
Equipment that had a cost of $20,000 and was 70% depreciated was sold during 2017.
COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2017 AND 2016 12/31/17 12/31/16 Cash Accounts receivable Short-term debt investments (available-for-sale) Inventory Prepaid rent Equipment Accumulated depreciation-equipment Copyrights Total assets $6,000 $6,900 50,800 18,100 60,400 4,000 152,400 131,000 62,400 35,100 40,100 5,100 (34,700) (24,800 ) 45,500 49,900 $311,900 $296,300 Accounts payable Income taxes payable Salaries and wages payable Short-term loans payable Long-term loans payable Common stock, $10 par Contributed capital, common stock Retained earnings Total liabilities & stockholders' equity $45,900 $39,900 6,000 4,000 10,000 68,700 100,000 100,000 30,000 37,700 $311,900 $296,300 4,000 8,100 8,100 59,500 30,000 56,300Explanation / Answer
Statement of Cash Flows For the Year Ended December 31, 2017 Cash flows from operating activities: Net income 24500 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 23900 Amortization of copyright 4400 Gain on sale of equipment -2000 Increase in accounts receivable -11600 Decrease in inventories 20300 Increase in prepaid rent -1100 Increase in accounts payable 6000 Increase in salaries and wages payable 4100 Decrease in income taxes payable -2000 42000 Net cash provided by operating activities 66500 Cash flows from investing activities: Sale of equipment 8000 Purchase of equipment -41400 Purchase of available-for-sale investments -17000 Net cash used by investing activities -50400 Cash flows from financing activities: Principal payment on short-term loan -1900 Principal payment on long-term loan -9200 Dividend payments -5900 Net cash used by financing activities -17000 Net decrease in cash -900 Cash, January 1, 2017 6900 Cash, December 31, 2017 6000
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