CHELSEA CORPORATION Comparative Balance Sheet 2017 Assets $31,000 Cash Accounts

Question

CHELSEA CORPORATION Comparative Balance Sheet 2017 Assets $31,000 Cash Accounts receivable (net) Prepaid insurance Land Equipment Accumulated depreciation 38,000 70,000 25,000 18,000 70,000 60,000 17,000 40,000 60,000 13.000) Total Assets $195,000 Liabilities and Stockholders' Equity Accounts payable Bonds payable Common stock Retained earnings $13,000 27,000 140,000 6,000 19,000 115,000 Total liabilities and stockholders' equity S201-099 $195,000 Additional information 1. Net loss for 2017 is $18,000. 2. Cash dividends of $16,000 were declared and paid in 2017 3. Land was sold for cash at a loss of $4,000. This was the only land transaction during the year 4. Equipment with a cost of $15,000 and accumulated depreciation of $10,000 was sold for $7,000 cash. 5. $22,000 of bonds were retired during the year at carrying (book) value. 6. Equipment was acquired for common stock. The fair value of the stock at the time of the exchange was $25,000 Instructions Prepare a statement of cash flows for the year ended 2017, using the indirect method. Hints: Use T-accounts to find Depreciation expense and for the issuance of Bonds Payable

Explanation / Answer

Statement of cash flow Cash flows from operating activities Net Loss ($18,000) Adjustments to convert net income to cash basis Loss on sale of Land    4,000.00 Gain on sale of equipment (7000-5000) (2,000.00) Depreciation expenses    17000 Increase in Accounts receivable -10000 Incraese in Prepaid expenses -8000 Increase in Accounts Payable 7000         8,000.00 Net cash from operating activities (10,000.00) Cash flows from investing activities Sale of equipment 7000 Sale of land (40000-18000)-4000 18000 25000 Net cash used investing activities     25,000.00 Cash flows from financing activities Repayment of Bonds Payable -22000 Borrowings from Bonds pyaable 30000 Payment of Dividends   -16000      (8,000.00) Net cash from financing activities     (8,000.00) Net Increase in cash and cash equivalents     7,000.00 Cash and cash equivalents at beginning of period 31,000.00 Ending Balance       38,000.00 Bonds Payable Cash 22000 Beg bal 19000 Issue 30000 End Bal 27000 Accumualted Dep equipment 10000 Beg Bal 13000 Dep exp 17000 End Bal 20000

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