The comparative balance sheet of Pelican Joe Industries Inc. for December 31, 20
ID: 2572869 • Letter: T
Question
The comparative balance sheet of Pelican Joe Industries Inc. for December 31, 2016 and 2015, is as follows:
1
Dec. 31, 2016
Dec. 31, 2015
2
Assets
3
Cash
$488.00
$160.00
4
Accounts receivable (net)
278.00
201.00
5
Inventories
177.00
109.00
6
Land
400.00
448.00
7
Equipment
225.00
172.00
8
Accumulated depreciation-equipment
(58.00)
(29.00)
9
Total assets
$1,510.00
$1,061.00
10
Liabilities and Stockholders’ Equity
11
Accounts payable (merchandise creditors)
$176.00
$160.00
12
Dividends payable
28.00
13
Common stock, $10 par
103.00
55.00
14
Paid-in capital: Excess of issue price over par—common stock
246.00
123.00
15
Retained earnings
957.00
723.00
16
Total liabilities and stockholders’ equity
$1,510.00
$1,061.00
The following additional information is taken from the records:
Required:
1
Dec. 31, 2016
Dec. 31, 2015
2
Assets
3
Cash
$488.00
$160.00
4
Accounts receivable (net)
278.00
201.00
5
Inventories
177.00
109.00
6
Land
400.00
448.00
7
Equipment
225.00
172.00
8
Accumulated depreciation-equipment
(58.00)
(29.00)
9
Total assets
$1,510.00
$1,061.00
10
Liabilities and Stockholders’ Equity
11
Accounts payable (merchandise creditors)
$176.00
$160.00
12
Dividends payable
28.00
13
Common stock, $10 par
103.00
55.00
14
Paid-in capital: Excess of issue price over par—common stock
246.00
123.00
15
Retained earnings
957.00
723.00
16
Total liabilities and stockholders’ equity
$1,510.00
$1,061.00
Explanation / Answer
Answer A A statement of cash flows, using the indirect method Cash flow from Operating activities Net Income $339 Depreciation $29 Gain on sale of land -$74 Adjustments for Working capital items Increase in Accounts Receivables -$77 Increase in Inventories -$68 Increase in Accounts Payable $16 -$174 Net Cash available from Operating activities $165 Cash flow from Investing activities Sale of land $122 Purchase of equipment -$53 Net Cash available from Investing activities $69 Cash flow from Financing activities Issue of Common stock $171 Dividend paid -$77 Net Cash available from financing activities $94 Net Cash Surplus $328 Add : Cash balance as on Dec.31,2015 $160 Cash balance as on Dec.31,2016 $488 Answer B Net cash flow from operations for Pelican Joe Industries Inc. is less than net Income. Source of difference is explained with following reconciliation table Net Cash flow from Operations $165.00 Less : Depreciation $29.00 Add : Gain on sale of land $74.00 Add : Increase in Net working capital $129.00 Net Income $339.00