Homework P17-6C Presented below are the financial statements of Josten Company.
ID: 2602409 • Letter: H
Question
Homework P17-6C Presented below are the financial statements of Josten Company. JOSTEN COMPANY Comparative Balance Sheets December 31 Assets Cash Accounts receivable 2017 24,000 25,000 41,000 2016 33,000 14,000 25,000 Property, plant, and equipment Accumulated depreciation $69,000 $78,000 (26.000) 43,000 (24.000) 54,000 $126,000 Total $133,000 Liabilities and Stockholders' Equity Accounts payable Income taxes payable Bonds payable Common stock Retained carnings 30,000 25,000 20,000 25,000 33,000 43,000 20,000 10,000 25,000 28,000 $126,000 Total $133,000 Income Statement For the Year Ended December 31, 2017 Sales revenue Cost of goods sold Gross profit Selling expenses Administrative expenses Income from operations Interest expense Income before income taxes Income tax expense Net income $281,000 204,000 77,000 37,000 40,000 5,000 35,000 10,000 25,000 $28,000 9,000 Additional data: 1. Dividends of $20,000 were declared and paid. 2. During the year equipment was sold for $12,000 cash. This equipment cost $15,000 originally and had a book value of $12,000 at the time of sale. 3. All depreciation expense, $5,000, is in the selling expense category 4. All sales and purchases are on account. 5. Additional equipment was purchased for $6,000 cash. Instructions (a) Prepare a statement of cash flows using the indirect method.
Explanation / Answer
a) Statement of cash flows using indirect method for 2017 (Amount in $)
WN 1) Depreciation expense is a non cash expense, hence needed to be add back to net income for calculating operating cash flows. Similarly interest expense is a non operating expense or financing expense, therefore also added back for calculating operating cash flows.
Cash Flows from Operating activities Net income 25,000 Adjustments for calculating operating cash flows Add: Depreciation expense for the current year 5,000 Add: Interest expense 5,000 Less: Increase in Accounts receivable (25,000-14,000) (11,000) Less: Increase in Inventory (41,000-25,000) (16,000) Less: Decrease in Accounts Payable (43,000-30,000) (13,000) Add: Increase in income taxes payable (25,000-20,000) 5,000 Total Adjustments (25,000) Net cash used in operating activities (A) 0 Cash Flows from Investing activities Purchase of Property, Plant and Equipment (6,000) Sale of Property, Plant and Equipment 12,000 Net cash flow from investing activities (B) 6,000 Cash Flows from Financing activities Dividend paid (20,000) Cash from issue of bonds (20,000-10,000) 10,000 Interest expense paid (5,000) Net cash used in financing activities (C) (15,000) Net increase or (decrease) in cash (A+B+C) (9,000) Cash balance at the beginning of 2017 33,000 Cash balance at the end of 2017 24,000Related Questions
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