Prepare a statement of cash flows using the diredt or indirect method (your choi
ID: 2543607 • Letter: P
Question
Prepare a statement of cash flows using the diredt or indirect method (your choice) based on the following. Make reasonable assumptions as needed ABC Inc Balance Sheets 12/31/2016 12/31/2017 Assets ABC Inc Income Statement 12 mos ending 12/31/2017 Current Assets: as Accounts Receivable, net Invent Prepaid expenses 14,236,295 1,400,000 2,500,000 192,000 18,328.295 19,658,695 1,190.000 2,460,000 201,600 23,510,295 Total Current Assets $22,000,000 13,200,000 8,800,000 Sales Pro and Equipment Cost of Sales Machinery and Equipment Computers, Furniture and Fixtu 4.400,000 1,000,000 5,400,000 4,505,000 1,300.000 5,805,000 Gross Profit Less Accumulated Depreciation 2,900,000) 2,500,000 (4,055,000) 1,750,000 Net Pro y and Equipment Operating Expense Depreciation Expense 3,300,000 1,155,000 825,000 5,280,000 3,520,000 Tax Expense Total Assets 20,828,29:5 25,260.295 Total Expense Liabilities and Shareholders' Equitv Current Liabilities Net Income Other Information Equipment and computers were purchased for cash 100,000 shares of common stock sold for $10 per share Cash dividends of $150,000 were declared Accounts Payable Accrued liabilities Dividends Payable Income taxes pavable 756,000 1.200,000 120,000 300,000 2,376,000 806,000 1,140,000 132,000 360,000 2,438,000 Total current labilities Long Term Liabilities 2,756,295 2,756,295Explanation / Answer
Ans. ABC Inc. Statement of Cash Flows Particulars Amt.($) Amt.($) Cash Flows from operating activities: Net Income 3,520,000 Adjus. To reconcile net cash flow from operating activities: Add: Provision for Depreciation 1,155,000 Provision for Dividends 162,000 Provision of Income Tax 825,000 Operating profit before Working Capital Changes 5,662,000 Add: Increase in CL and Decrease in CA Accounts Receivable 210,000 Accounts Payable 50,000 Inventory 40,000 Less: Increase in CA and Decrease in CL Prepaid Expenses (9,600) Accrued liabilities (60,000) Operating Profit before Income Taxes 5,892,400 Less: Income Tax Paid (765,000) Net Cash Generated from Operating Activities 5,127,400 Cash flows from (Used for) Investing activities: Purchase of Machinery and Equipment (105,000) Purchase of Computers, Furniture and Fixtures (300,000) Net Cash Used in Investing Activities (405,000) Cash flows from (Used for) financing activities: Payment of Dividends (150,000) Payment of Long term loan (150,000) Proceeds from sale of Common stock 1,000,000 Net Cash Generated from Financing Activities 700,000 Net Increase and Decrease in Cash 5,422,400 Cash at the beginning of the year 14,236,295 Cash at the end of the year 19,658,695 Working Notes : Assumpiton :- It is assumed that payment of long term loan are made during the year because the detail for "Shareholder Equity" was not provided. 1) Machinery and Equipment A/c Particulars Amt.($) Particulars Amt.($) To Balance b/d 4,400,000 To Cash 105,000 By Balance c/d 4,505,000 4,505,000 4,505,000 2) Dividend Payable Particulars Amt.($) Particulars Amt.($) To Cash 150,000 By Balance b/d 120,000 By P&L 162,000 To Balance c/d 132,000 282,000 282,000 3) Income Tax Payable A/c Particulars Amt.($) Particulars Amt.($) To Cash 765,000 By Balance b/d 300,000 By P&L A/c 825,000 To Balance c/d 360,000 1,125,000 1,125,000 4) Computers, Furniture and Fixtures A/c Particulars Amt.($) Particulars Amt.($) To Balance b/d 1,000,000 To Cash 300,000 By Balance c/d 1,300,000 1,300,000 1,300,000 5) Accumulated Depreciation Particulars Amt.($) Particulars Amt.($) - By Balance b/d 2,900,000 By P&L A/c 1,155,000 To Balance c/d 4,055,000 4,055,000 4,055,000