Exercise 12-6 The following three accounts appear in the general ledger of Cheye

Question

Exercise 12-6 The following three accounts appear in the general ledger of Cheyenne Corp. during 2017. Equipment Date Jan. 1 Blance July 31 Purchase of equipment Sept. 2 Cost of equipment constructed Nov. 10 Cost of equipment sold bit Credit Balance 544,000 782,000 962,200 166,600 795,600 De 238,000 180,200 Accumulated Depreciation-Equipment Date Jan. 1 Baance Nov. 10 Accumulated depreciation on equipment sold Dec. 31 Depreciation for year Credit Balance 241,400 187,000 95,200 282,200 Debit 54,400 Retained Earnings Date Jan. 1 Aug. 23 Dec. 31 Credit Balance 357,000 309,400 244,800 554,200 Debit Balance Dividends (cash) Net income 47,600 From the postings in the accounts, indicate how the information is reported on a statement of cash flows using the indirect method. The loss on disposal of plant assets was $27,200. (Hint: Cost of equipment constructed is reported in the investing activities section as a decrease in cash of $180,200.) (Show amounts that decrease cash flow with eithera -sign e.g.-15,000 or in parenthesis e.g. (15,000).)

Explanation / Answer

Statement of Cash Flows AS ON DECEMBER 31 2017 Amount in $ Amount in $ Net income $          2,44,800 Cash flows from operating activities Adjustments for: Depreciation of the year $             95,200 Loss on disposal of plant $             27,200 $          1,22,400 Net cash from operating activities $          3,67,200 Cash flows from investing activities Purchase of Equipment $        -2,38,000 Cost of equipment constructed $        -1,80,200 Sale of Equipment $             85,000 Net cash used in investing activities $        -3,33,200 Cash flows from Financing activities Dividend Paid $            -47,600 Net cash used in financing activities $            -47,600 Net increase in cash and cash equivalents $            -13,600 Add :Cash and cash equivalents at beginning of period $                       -   Cash and cash equivalents at end of period $            -13,600 CALCULATION OF SALE VALUE OF THE EQUIPMENT Purchase Value = $          1,66,600 Less: Accumulated Depreciation $             54,400 Book Value $          1,12,200 Less : Loss on sale of Equipment $             27,200 Net Relizable or sale value= $             85,000

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