Prepare the 2017 statement of cash flows in good form using the indirect method

Question

Prepare the 2017 statement of cash flows in good form using the indirect method

ABC Company Comparative Balance Sheets As of 12/31/16 and 12/31/17 12/31/17 12/31/16 12/31/17 12/31/16 Cash A/R Allow. Doubtful Acct Inventory PP&E; Acc. Deprec 41,800 30,000 AP 110,000 89,000 T/P 41,000 50,000 3,000 8,000 350,000220,000 281,000 150,000 100,000 95,775 684,050 476,775 6,900 Dividend payable (2,750) 150,000 135,000 N/P 450,000 300,000 (65,000) (75,000) C/S 684,050 476,775 R/E (2,225) ABC Company Income Statement For Year Ending 12/31/17 Accumulated Revenue Cost of goods sold Gross profit Gain (loss) on sale of equipment Depreciation expense S&A; expense Interest expense Taxable income Tax expense Net income 650,000 425,000 225,000 (22,500) (80,000) 35,000) 1. ??? borrowed $150,000 on l/1/17 to help pay for a new machine that cost $250,000. 2. ABC sold one old machine for $57,500 3. ABC paid the dividend declared on 12/31/16. 4. ABC paid a S10,000 dividend that was declared on 6/30/17. 5. ABC declared a second $15,000 dividend on 12/31/17. 6, Tax rate is 35%. Required Prepare the 2017 statement of cash flows in good form. Use the indirect method.

Explanation / Answer

Cash flow indirect method Cash flow from operating activities Net income 50375 Adjustments to reconcile the net income Amortization of patent Depreciation expense 22500 Loss on sale of equipment 10000 Gain on sale of land Changes in current asset and liabilities Increase in accounts receivable -20475 Increase in Inventory -15000 decrease in accounts payable -9000 Increase in trade payable 3900 -8075 Cash flow from operating activities 42300 Cash flow from Investing activities Equipment purchased -100000 Equipment sold 57500 Cash flow from Investing activities -42500 Cash flow from Financing activities Notes payable -20000 Common stock 50000 Dividend paid -18000 Cash flow from Financing activities 12000 Net Cash and cash equivalent 11800 Add Beginning cash and cash equivalent 30000 Ending cash and cash equivalent 41800

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