Please do not answer this in particulars. Prepare a statement of cash flows usin
ID: 2484131 • Letter: P
Question
Please do not answer this in particulars.
Prepare a statement of cash flows using the indirect method
The following is a condensed trial balance of Bravo Co., a publicly held company, after adjustments for income tax expense.
Bravo Co.
Condensed Trial Balance
Accounts
12/31/2015
Balances Dr. (Cr.)
12/31/2014
Balances Dr. (Cr.)
Cash
$484,000
$817,000
Accounts receivable, net
670,000
610,000
Property, plant, and equipment
1,070,000
995,000
Accumulated depreciation
(345,000)
(280,000)
Dividends payable
(25,000)
(10,000)
Income taxes payable
(60,000)
(150,000)
Deferred income tax liability
(63,000)
(42,000)
Bonds payable
(500,000)
(1,000,000)
Unamortized premium on bonds
(71,000)
(150,000)
Common stock
(350,000)
(150,000)
Additional paid-in capital
(430,000)
(375,000)
Retained earnings
(185,000)
(265,000)
Sales
(2,420,000)
Cost of sales
1,863,000
Selling and administrative expenses
220,000
Interest income
(14,000)
Interest expense
46,000
Depreciation
88,000
Loss on sale of equipment
7,000
Gain on extinguishment of bonds
(90,000)
Income tax expense
105,000
> During 2015 equipment with an original cost of $50,000 was sold for cash, and equipment costing $125,000 was purchased.
> On January 1, 2015, bonds with a par value of $500,000 and related premium of $75,000 were redeemed. The $1,000 face value, 10% par bonds had been issued on January 1, 2006 to yield 8%. Interest is payable annually every December 31 through 2025.
> Bravo's tax payments during 2015 were debited to Income Taxes Payable. Bravo recorded a deferred income tax liability of $42,000 based on temporary differences of $120,000 and an enacted tax rate of 35% at December 31, 2014; prior to 2014 there were no temporary differences. Bravo's 2015 financial statement income before income taxes was greater than its 2015 taxable income, due entirely to temporary differences, by $60,000. Bravo's cumulative net taxable temporary differences at December 31, 2015, were $180,000. Bravo's enacted tax rate for the current and future years is 35%.
> 60,000 shares of common stock, $2.50 par, were outstanding on December 31, 2014.
> Bravo issued an additional 80,000 shares on April 1, 2015.
> There were no changes to retained earnings other than dividends declared. Prepare a statement of cash flows using
Bravo Co.
Condensed Trial Balance
Accounts
12/31/2015
Balances Dr. (Cr.)
12/31/2014
Balances Dr. (Cr.)
Cash
$484,000
$817,000
Accounts receivable, net
670,000
610,000
Property, plant, and equipment
1,070,000
995,000
Accumulated depreciation
(345,000)
(280,000)
Dividends payable
(25,000)
(10,000)
Income taxes payable
(60,000)
(150,000)
Deferred income tax liability
(63,000)
(42,000)
Bonds payable
(500,000)
(1,000,000)
Unamortized premium on bonds
(71,000)
(150,000)
Common stock
(350,000)
(150,000)
Additional paid-in capital
(430,000)
(375,000)
Retained earnings
(185,000)
(265,000)
Sales
(2,420,000)
Cost of sales
1,863,000
Selling and administrative expenses
220,000
Interest income
(14,000)
Interest expense
46,000
Depreciation
88,000
Loss on sale of equipment
7,000
Gain on extinguishment of bonds
(90,000)
Income tax expense
105,000
Total 0 0Explanation / Answer
Answer Bravo Co. Statement of Cash Flow at 2015 Cash flow from operating activities Sales 2420000 Interest Income 14000 Increase in account receivables (60,000) Cash collection 2374000 Cost of Goods Sold 1863000 Increase in inventories 0 Decrease in Prepaid expenses 0 Increase in Accrued Liabilities 0 Decrease in account payable 0 Cash payment for purchase 1863000 Selling & Administrative exp 220000 Cash operation expenses 220000 Interest Expenses 46000 Cash Interest 46000 Income Tax 105000 Decrease in Income tax payable 90000 Deferred tax payble (21,000) Cash Payment for income tax 174,000 Net Cash Flow From Operation 71000 Investment activities Increase in Equipment (98,000) Loss on sale of Equipment (7,000) Profit on sale of Long term investment 0 Decrease In long term investment 0 Cash flow from investment (105,000) Financing Activities Stock Issued 200000 Gain on extinguish of bonds 90000 Bond paid (500,000) Unamortized premium on Bond (79,000) Contributed Capital in excess of pay 55000 Dividend paid (65,000) Fund raise from Bank loan 0 Cash flow from Financing (299,000) Net Cash Flow (333,000) Cash at 2015 484000 Cash at 2014 817000 Cash Difference (333,000)