Exercise 23-10 Following are selected balance sheet accounts of Bridgeport Bros.

Question

Exercise 23-10

Following are selected balance sheet accounts of Bridgeport Bros. Corp. at December 31, 2017 and 2016, and the increases or decreases in each account from 2016 to 2017. Also presented is selected income statement information for the year ended December 31, 2017, and additional information.

2017

2016

Increase
(Decrease)

2017

2016

Increase

Additional information:

Determine the category (operating, investing, or financing) and the amount that should be reported in the statement of cash flows for the following items.

Activity

Selected balance sheet accounts Assets

2017

2016

Increase
(Decrease)

Accounts receivable $33,700 $24,000 $9,700 Property, plant, and equipment 275,600 247,800 27,800 Accumulated depreciation—plant assets (178,200 ) (167,600 ) (10,600 ) Liabilities and stockholders’ equity

2017

2016

Increase

Bonds payable $ 49,200 $46,400 $2,800 Dividends payable 8,000 5,000 3,000 Common stock, $1 par 21,800 18,900 2,900 Additional paid-in capital 8,900 3,000 5,900 Retained earnings 103,400 91,000 12,400 Selected income statement information for the year ended December 31, 2017: Sales revenue $154,000 Depreciation 37,800 Gain on sale of equipment 14,300 Net income 30,700

Explanation / Answer

a) payments for purchase of equipment is investing activity

Opening balance 2017. =. 247800

Less:sale of equipment =. (44800) cost

Less: closing balance. =. (275600)

Purchase of new equipment =. 72600

Out flow from investment activity 72600-20000= 52600

Bonds are issued part of asset value this should be eliminated because bonds issued is non cash transaction.

Out flow from investing activity is $52600.

b) proceeds from the sale of equipment:

Gain on sale of equipment 14300 as given it should be shown under investing activity.

C) cash dividend paid is financing activity.

Dividend payable doesn't effect the cash flow but cash dividend paid is out flow to the firm so it is financing activity.

d) redemption of bonds payable:

Increase in redemption of bonds payable is financing activity

Amount is $2800.

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