Oriole Company has not yet prepared a formal statement of cash flows for the 201
ID: 2591391 • Letter: O
Question
Oriole Company has not yet prepared a formal statement of cash flows for the 2017 fiscal year. Comparative balance sheets as of December 31, 2016 and 2017, and a statement of income and retained earnings for the year ended December 31, 2017, are presented as follows.
ORIOLE COMPANY
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 2017
($000 OMITTED)
$3,840
$1,190
720
70
80
20
30
10
30
2,150
1,690
845
845
300
1,145
615
$530
ORIOLE COMPANY
COMPARATIVE BALANCE SHEETS
AS OF DECEMBER 31
($000 OMITTED)
2017
2016
$337
$90
10
50
780
490
710
570
1,837
1,200
160
80
920
610
(190
(110
120
150
1,010
730
$2,847
$1,930
$423
$360
39
30
340
340
802
730
180
180
982
910
1,335
720
530
300
1,865
1,020
$2,847
$1,930
Prepare a statement of cash flows using the direct method. Changes in accounts receivable and accounts payable relate to sales and cost of goods sold. (Show amounts in the investing and financing sections that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
ORIOLE COMPANY
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 2017
($000 OMITTED)
$3,840
Expenses Cost of goods sold$1,190
Salaries and benefits720
Heat, light, and power70
Depreciation80
Property taxes20
Patent amortization30
Miscellaneous expenses10
Interest30
2,150
Income before income taxes1,690
Income taxes845
Net income845
Retained earnings—Jan. 1, 2017300
1,145
Stock dividend declared and issued615
Retained earnings—Dec. 31, 2017$530
Explanation / Answer
Solution
Oriole Company
Statement of cash flows
For the Year Ended December 31, 2017
Particulars
Amount ($)
Amount ($)
Cash flow from operating activities
Net Income (WN 1)
$ 230,000
Adjustment for non cash , non operating expenses and incomes and working capital changes
Depreciation
80,000
Patent amortization
30,000
Increase in accounts payable
63,000
Increase in tax payable
9,000
Decrease in US Treasury note
40,000
Increase in inventory
(140,000)
Increase in accounts receivable
(290,000)
Net cash provided by operating activities (A)
22,000
Cash flow from investing activities
Purchase of Buildings and equipment (610,000- 920,000)
(310,000)
Purchase of land
(80,000)
Net cash used in investing activities (B)
(390,000)
Cash flow from financing activities
Proceeds from issue of common stock
615,000
Net cash provided by investing activities (C)
615,000
Net increase or decrease in cash (A+B+C)
247,000
Add: Cash on 1 January 2017 or on 31 December 2016 (Opening cash balance )
90,000
Cash on 31 December 2017 (Closing cash balance)
337,000
Working Notes:
(1)Net Income = Retained earnings on Dec. 31, 2017 - Retained earnings—Jan. 1, 2017
= $ 530,000- $ 300,000
= $ 230,000
Particulars
Amount ($)
Amount ($)
Cash flow from operating activities
Net Income (WN 1)
$ 230,000
Adjustment for non cash , non operating expenses and incomes and working capital changes
Depreciation
80,000
Patent amortization
30,000
Increase in accounts payable
63,000
Increase in tax payable
9,000
Decrease in US Treasury note
40,000
Increase in inventory
(140,000)
Increase in accounts receivable
(290,000)
Net cash provided by operating activities (A)
22,000
Cash flow from investing activities
Purchase of Buildings and equipment (610,000- 920,000)
(310,000)
Purchase of land
(80,000)
Net cash used in investing activities (B)
(390,000)
Cash flow from financing activities
Proceeds from issue of common stock
615,000
Net cash provided by investing activities (C)
615,000
Net increase or decrease in cash (A+B+C)
247,000
Add: Cash on 1 January 2017 or on 31 December 2016 (Opening cash balance )
90,000
Cash on 31 December 2017 (Closing cash balance)
337,000
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