The comparative balance sheets for 2015 and 2016 and the statement of income are
ID: 2454097 • Letter: T
Question
The comparative balance sheets for 2015 and 2016 and the statement of income are given below for Big Company. Additional information from Big’s accounting records is provided also.
Big Company
Balance Sheets
2016 2015
Cash 114 100
Accts rec 192 161
Inventory 145 140
Land 106 130
Ppe 710 540
a/d ppe (199) (145)
accts pay 42 49
salary pay 5 7
interest pay 7 6
tax pay 7 11
lt note pay 0 34
bond pay 308 240
comm stock 405 340
apic 190 170
r/e 104 69
INCOME STATEMENT
BIG CO.
FOR THE YEAR 2016
SALES 600
COGS 270
SALARY EXP 66
DEPRECIATION EXP 54
INTEREST EXP 17
LOSS ON SALE LAND 4
INCOME TAX EXP 89
TOTAL EXP 500
INCOME 100
ADDITIONAL INFORMATION:
THERE WAS ONLY 1 TRANSACTION INVOLVING LAND THIS YEAR
THERE WAS ONLY 1 PURCHASE OF PPE THIS YEAR
THE LT NOTE WAS PAID AT MATURITY ON JAN. 1 2016
THE BONDS WERE ISSUED AT FACE VALUE
THERE WAS ONLY 1 COMMON STOCK TRANSACTION (HINT: IT SOLD ABOVE PAR)
THE COMPANY PAID A DIVIDEND
REQUIRED: PREPARE A STATEMENT OF CASH FLOWS, YOU MAY USE EITHER THE DIRECT OR INDIRECT METHOD FOR CASH FROM OPERATIONS?
Explanation / Answer
Solution:
Cashflow Statement Cash flow from Operations Net Income 100 Add: Depreciation 54 Add: Interest Expense 17 Add: Loss on sale of Land 4 Add: Income Tax Payable 89 264 Working Capital Changes Increase in accounts receivables -31 Increase in inventory -5 Decrease in accounts payable -7 Salaries payable -2 Cash flow from Operations 219 Less: Tax paid 93 Cash flow from Operations 126 Cash flow from investing activities Sale of Land 20 Purchase of PPE -170 Cash flow from investing activities -150 Cash flow from Financing activities Interest paid -16 Dividend Paid -65 Logterm Bonds redeemed -34 Issue of bonds 68 Issue of common stock 85 Cash flow from Financing activities 38 Beginning Cash 100 Add: Changes in cash 14 Cash in the end 114