Following are selected balance sheet accounts of Wildhorse Bros. Corp. at Decemb

Question

Following are selected balance sheet accounts of Wildhorse Bros. Corp. at December 31, 2017 and 2016, and the increases or decreases in each account from 2016 to 2017. Also presented is selected income statement information for the year ended December 31, 2017, and additional information.

2017

2016

Increase
(Decrease)

2017

2016

Increase

Additional information:

Determine the category (operating, investing, or financing) and the amount that should be reported in the statement of cash flows for the following items.

Selected balance sheet accounts Assets

2017

2016

Increase
(Decrease)

Accounts receivable $34,000 $24,100 $9,900 Property, plant, and equipment 274,800 244,700 30,100 Accumulated depreciation—plant assets (179,200 ) (168,200 ) (11,000 ) Liabilities and stockholders’ equity

2017

2016

Increase

Bonds payable $ 49,200 $46,300 $2,900 Dividends payable 8,000 5,000 3,000 Common stock, $1 par 21,900 18,800 3,100 Additional paid-in capital 9,000 3,000 6,000 Retained earnings 104,500 91,000 13,500 Selected income statement information for the year ended December 31, 2017: Sales revenue $154,700 Depreciation 37,900 Gain on sale of equipment 14,400 Net income 30,900

Explanation / Answer

Items

Activity

Amount

Payments for purchase of property, plant, and equipment.

Investing activity

($55300)

Proceeds from the sale of equipment

Investing activity

$32900

Cash dividends paid

Financing activity

($14400)

Redemption of bonds payable

Financing activity

($17300)

Working note & explanation;

Amount of each items will be calculated as follow;

1. Payments for purchase of property, plant, and equipment;

(Beginning balance + Purchase in exchange of bonds – Sale) – Ending balance

(Beginning balance + Purchase in exchange of bonds – Sale) – Ending balance

($244700 + $20200 – $45400) – $274800 = ($55300)

2. Proceeds from the sale of equipment;

First of all let’s calculate accumulated depreciation on sold equipment;

(Beginning balance + Depreciation expenses – Ending balance)

($168200 + $37900 – $179200) = $26900

It is given that cost of equipment sold = $45400

Gain on sale of equipment is = $14400

Hence cash proceeds from sale of equipment ($45400 + $14400 – $26900) = $32900

3. Cash dividends paid;

Cash dividend paid will be calculated as follow;

(Beginning balance of retained earnings + net income – Ending balance of retained earnings – increase in dividend payable)

($91000 + $30900 – $104500 – $3000) = $14400

4. Redemption of bonds payable;

Cash dividend paid will be calculated as follow;

(Beginning balance of bonds payable + Issue of bonds in exchange for property – Ending balance of bonds payable)

($46300 + $20200 – $49200) = $17300

Items

Activity

Amount

Payments for purchase of property, plant, and equipment.

Investing activity

($55300)

Proceeds from the sale of equipment

Investing activity

$32900

Cash dividends paid

Financing activity

($14400)

Redemption of bonds payable

Financing activity

($17300)

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