The income statement for CashCat Company for the year ending December 31, 2016 i
ID: 2584832 • Letter: T
Question
The income statement for CashCat Company for the year ending December 31, 2016 is shown in Exhibit 1 and balance sheets as of December 31, 2015 and 2016 are shown in Exhibit 2. The company’s accountant provided the additional information for transactions during 2016:
(1) Purchased property, plant and equipment (PP&E) at a cost of $400,000.
(2) Issued $98,000 of new bonds payable.
(3) Issued common stock for $25,000.
Required: Prepare a statement of cash flows, in good form, for 2016 using the indirect method.
EXHIBIT 1 CASHCAT COMPANY Income Statements For the Year Ending December 31, 2016 Total revenue $1,000,000 Costs and expenses: Cost of sales $425,000 General and administrative expense 300,000 Depreciation-PP&E 60,000 Total costs and expenses 785,000 Operating income 215,000 Other items: Gain on retirement of bonds 25,000 Loss on sale of PP&E (10,000) Interest expense (80,000) Income before income taxes 150,000 Income taxes 50,000 Net income $100,000Explanation / Answer
CASH FLOW STATEMENT OF CASHCAT COMPANY FOR THE YEAR ENDING December 31, 2016 Details Amount in $ Cash Flows from Operating Activities: Net income before tax 150,000 Adjustment for Reconcile Net Income to net cash provided from Operations Add: Interest Expense 80,000 Add: Loss on sale of PP&E 10,000 Less: Gain on retirement of bonds -25,000 Add: Depreciation -PP &E 60,000 Add: Decrease in Inventory 10,000 Less: Increase in Accounts receivable -10,000 Add: Increase in Acconts Payable 15,000 Less: Taxes Paid (See note below) -52,000 Net Cash inflows from Operating Activities 238,000 Cash Flows from Investing Activities: Outflow from Purchase of Property Plant and equipment -400,000 Inflow from sale of Property, Plant and equipment (See note) 255,000 Net cash outflow from Investing Activities -145,000 Cash flows from Financing Activities Dividend paid (See note) -70,000 Issuance of Bonds payable 98,000 Issuance of Common Stock in excess of par value(See note) 30,000 Interest paid on bonds payable -80,000 Outflow on retirement of bonds payable(See note) -75,000 Net Cashoutflows from Financing Activities -97,000 Net Cashoutflow during the year -4,000 Add: Opening balance of cash and cash Equivalents 20,000 Closing balance of cash and cash Equivalents 16,000 Working Note: 1. Calculation of Tax Paid during the year Opening Income tax payable 30,000 Add: Provision made during the year 50,000 Less: Closing Income tax payable 28,000 Taxes Paid 52,000 2. Calculation of sale of Property Plant and Equipment Calculation of Accumulated depreciation on sale of PP&E Opening Balance of Accumulated Depreciation 325,000 Add: Depreciation charged during the year 60,000 Less: Closing Balance of Accumulated Depreciation 350,000 Accumualted Depreciation on Sale of PP&E 35,000 Calculation of Sale value of PP&E sold: Opening cost of PP&E 800,000 Add: Purchase during the year 400,000 Less: Closing Cost of PP&E 900,000 Cost of PP&E Sold 300,000 Less: Accumulated Depon sold Assets 35,000 Less: Loss on sale of PP&E 10,000 Sale value of PP&E 255,000 3. Calculation of Dividend Paid Opening balance of Retained earnings 180,000 Add: Net income after tax earned during the year 100,000 Less: Closing balance of Retained earnings 210,000 Dividend paid 70,000 4. Calculation of amount received at the time of common Stock Opening balance of Treasury Stock 40,000 Less: Closing Balance of Treasury Stock 20,000 Common Stock Cancelled and redeemed 20,000 Closing balance of Capital in excess of par value 85,000 Less: Opening Balance of Capital in excess of par value 80,000 Amount received in excess of par value at the time of Issue 5,000 Opening Balance of Common Stock 10,000 Add:Par value of Issuance of Common Stock 25,000 Less: Treasury stock cancelled 20,000 Closing balance of Common Stock 15,000 Par value of Common Stock 25,000 Add: Amount received in excess of par value 5,000 Amount received in issuance on common stock 30,000 5. Calculation of amount paid on retirerment of Bonds payable Opening balance of bonds payable 270,000 Add: Issuance of Bonds 98,000 Less: Closing balance of Bonds payable 268,000 Nominal value of bonds payable redeem 100,000 Less: Gain on retirement of bonds 25,000 Amount paid on retirement 75,000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.