Hi I need help with this question: Scheeler Company has the following comparativ
ID: 2444829 • Letter: H
Question
Hi I need help with this question:
Scheeler Company has the following comparative balance sheet data available:
12/31/2015
12/31/2014
Cash
$30,000
$80,000
Accounts Receivable, net
160,000
100,000
Inventory
100,000
70,000
Prepaid Rent
20,000
10,000
Total Current Assets
$310,000
$260,000
Equipment
$400,000
$200,000
Accumulated Depreciation
(60,000)
(50,000)
Total Assets
$650,000
$410,000
Accounts Payable
$50,000
$40,000
Salaries Payable
40,000
40,000
Bonds Payable
0
50,000
Common Stock, $10 par
300,000
100,000
Additional Paid-in Capital
50,000
0
Retained Earnings
210,000
180,000
Total Liabilities & Stockholders’ Equity
$650,000
$410,000
Additional information:
1> The company reports net income of $100,000 and Depreciation Expense of $20,000 for the year ending December 31, 2015.
2> Dividends declared and paid in 2015, $70,000.
3> Equipment with a cost of $20,000, with Accumulated Depreciation of $10,000 was sold for $3,000.
4> New equipment was purchased for cash.
Using the indirect method, prepare the statement of cash flows for the year ending December 31, 2015.
12/31/2015
12/31/2014
Cash
$30,000
$80,000
Accounts Receivable, net
160,000
100,000
Inventory
100,000
70,000
Prepaid Rent
20,000
10,000
Total Current Assets
$310,000
$260,000
Equipment
$400,000
$200,000
Accumulated Depreciation
(60,000)
(50,000)
Total Assets
$650,000
$410,000
Accounts Payable
$50,000
$40,000
Salaries Payable
40,000
40,000
Bonds Payable
0
50,000
Common Stock, $10 par
300,000
100,000
Additional Paid-in Capital
50,000
0
Retained Earnings
210,000
180,000
Total Liabilities & Stockholders’ Equity
$650,000
$410,000
Explanation / Answer
Statement of cash flows
For the year ending December 31, 2015
Using the indirect method
Cash Flows from operating Activities:
Net income
$ 100,000
Add: Depreciation expense
$ 20,000
Add: Loss on Sale of Equipment (20000-10000)-30000
$ 7,000
Less: Increase in Accounts Receivable, net (160000-100000)
$ (60,000)
Less: Increase in Inventories (100000-70000)
$ (30,000)
Less: Increase in Prepaid Rent (20000-10000)
$ (10,000)
Add: Increase in Accounts Payable (50000-40000)
$ 10,000
Cash Flows from operating Activities
$ 37,000
Cash Flows from Investing Activities:
Sale of Equipment
$ 3,000
Purchase of Equipment = (400000-200000)+20000
$ (220,000)
Cash Flows from Investing Activities
$ (217,000)
Cash Flows from Financing Activities:
Dividends declared and paid
$ (70,000)
Repayment of bonds payable (50000-0)
$ (50,000)
Issue of common stock (300000-100000)+50000
$ 250,000
Cash Flows from Financing Activities
$ 130,000
Net cash flows
$ (50,000)
Add: Beginning cash balance
$ 80,000
Ending cash balance
$ 30,000
Statement of cash flows
For the year ending December 31, 2015
Using the indirect method
Cash Flows from operating Activities:
Net income
$ 100,000
Add: Depreciation expense
$ 20,000
Add: Loss on Sale of Equipment (20000-10000)-30000
$ 7,000
Less: Increase in Accounts Receivable, net (160000-100000)
$ (60,000)
Less: Increase in Inventories (100000-70000)
$ (30,000)
Less: Increase in Prepaid Rent (20000-10000)
$ (10,000)
Add: Increase in Accounts Payable (50000-40000)
$ 10,000
Cash Flows from operating Activities
$ 37,000
Cash Flows from Investing Activities:
Sale of Equipment
$ 3,000
Purchase of Equipment = (400000-200000)+20000
$ (220,000)
Cash Flows from Investing Activities
$ (217,000)
Cash Flows from Financing Activities:
Dividends declared and paid
$ (70,000)
Repayment of bonds payable (50000-0)
$ (50,000)
Issue of common stock (300000-100000)+50000
$ 250,000
Cash Flows from Financing Activities
$ 130,000
Net cash flows
$ (50,000)
Add: Beginning cash balance
$ 80,000
Ending cash balance
$ 30,000