16. The financial statements of Juniper Company appear below JUNIPER COMPANY Com

Question

16. The financial statements of Juniper Company appear below JUNIPER COMPANY Comparative Balance Sheet December 31 Assets Accourts receivable Merchandise inventory Property, plant, and equipment Accumulated depreciation 42,000 $25,000 34,000 15,000 78,000 $20.000 4000) 120 000 1280 26,000 Total Liabilities and Stockholders' Equity Accounts payable Income taxes payable Bonds payable Common stock Retained earmings 12,00023,000 13,000 10,000 41,000 10,000 33,000 24,000 Total JUNIPER COMPANY Income Statement For the Year Ended December 31, 2005 Sales Cost of goods sold Gross profit Selling-expenses $350,000 280.000 70,000 $20,000 hative expenses _16.00-3500 34,000 Income from operations Interest expense Income before income taxes Income tax expense Net income 30,000 The following additional data were provided 1. Dividends declared and paid were $14,000 2. During the year equipment was sold for $12.000.cash. This equipment cost $28,000 originally and had a book value of $12,000 at the time of sale 3. All depreciation expense is in the selling expense category. 4. All sales and purchases are on account. x 5. Accounts payable pertain to merchandise suppliers. y 6. All operating expenses except for depreciation were paid in cash. Instructions Prepare a statemient of cash flows for Juniper Company using the direct method.

Explanation / Answer

Amount ($) Amount ($) (A) Cash flow from operating activities Net Income 20,000 Add: Non cash and non operating expenses 16,000 Depreciation 12,000 (closing accumulated - [opening accumulated -accumulated of equipment sold] ) = 20000-(24000-16000) (Accumulated depreciation of equipment = Historical cost - book value = 28000-12000 = 16000 ) interest expense 4,000 Profit/loss on sale of equipment 0 Less: Non cash and non operating incomes 0 Cash profit after adjustment 36,000 Less: Increase in Current assets *merchandise inventory (22000-15000) -7,000 Add: Decrease in Current Assets *accounts recievable (34000-26000) 8,000 Less: Decrease in current liability *accounts payable (23000-12000) -11,000 Add: Increase in current liability *increase in income tax payable (13000-10000) 3,000 Cash inflow from operations 29,000 (B) Cash Flow from financing activities Dividend paid -14,000 Repayment of Bonds ( 33000-10000) -23,000 Issue of common stock (41000-24000) 17,000 Interest paid -4,000 Cash outflow from financing activities -24,000 (C) Cash Flow from investing activities Sale of Equipment 12,000 Cash inflow from financing activities 12,000 (D) Opening Balance of cash 25,000 Add: Net cash inflow 17,000 Operating activity 29,000 Financing activity -24,000 Investing activity 12,000 Closing balance of cash (2005) 42,000

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