Problem 1: Wild Willy\'s Nautical Adventures comparative balance sheets at Decem
ID: 2588376 • Letter: P
Question
Problem 1: Wild Willy's Nautical Adventures comparative balance sheets at December 31, 2017 and 2016 are presented below 2016 Chane $14,000 28,000 (4,000) Cash Accounts Receivable Inventory Prepaid Expenses Land Dock and Buildings Accumulated Depr- Dock/Build Equipment Accumulated Depr- Equip Total Assets 85,000 80,000 26,000 55,000 18,000 144,000 15,000 25,000 8,000 (34,000) 110,000 300,000 (93,000) (80,000) 210,000 (13,000) 54,000 264,000 (63.000 50000) (13.000) 5723.000 $695.000 Liabilities and Equity (25,000) Accounts Payable Notes Payable Bonds Payable Common Stock Retained Earnings 10,000 35,000 300,000 120,000 193,000 190,000 350,000 70,000 (S0,000) 50,000 Total Liabilities and Equity S723.000 $695,000 28.000 Additional Information: 1. Bonds were converted at face value by issuing 50,000 shares of $1 par value common stock 2. Operating Expenses include depreciation expense of $48,000. 3. Net Income for 2017 was $15,000. 4. Equipment was purchased for $38,000 cash and a note payable. In addition, equipment costing $34,000 with a book value of $12,000 was sold for $9,000 cash. 5. Cash dividends of $12,000 were declared and paid. 6. Land was sold for cash at a $5,000 loss structions: repare a statement of cash flows for the year ended December 31, 2017, using the indirect method.Explanation / Answer
Statement of cash flows using the indirect method:
Particulars
Amount ($)
Cash from operating Activities
Net Income
15000
Add: Depreciation
loss on sale of Equipment (12000-9000)
Loss on sale of Land
Interest Paid
Income Tax Expense
48000
3000
5000
Cash Operating activities before working capital adjustments, and taxes
71000
Working Capital Adjustments
Add:
Increase in Accounts Payable
Increase in accrued payables
Increase in Doubtful debts
Less: Increase in Inventory (80000-55000)
Increase in Accounts Receivable (85000-70000)
Increase in prepaid Expenses (26000-18000)
Decrease in Accounts Payable (35000-10000)
-25000
-15000
-8000
-25000
Cash from operating activities before taxes and extraordinary items
-2000
Less: Extraordinary loss
Cash From operating activities before taxes
Less: Taxes
Cash from operating activities
-2000
Cash from investing activities
Add: Sale of Equipment
Add: Sale of Land (34000-5000)
Less: Purchase of Equipment
Less: Investment made
Less: Purchase of building
9000
29000
-38000
Cash from Investing Activities
0
Cash from financing Activities
Add: Issue of notes payable
Add: Issue of common stock
Less: Repurchase of own stock
Less: Redemption of bond payable
Less: Cash Dividend paid
Less: Interest Paid
-12000
Cash from financing activities
-12000
Net Increase / decrease in cash
-14000
Opening Cash Balance
28000
Closing Cash Balance
14000
* Bonds are converted into common stock: Bonds were redeemed and common stock has been issued but cash has not been involved and hence not considered.
Redemption of Bonds payable = $50000
Issue of common stock = $120000 - $70000 = $50000
*Notes payable: Equipment has been purchased partly through accpetance of notes payable and partly through cash. As complete value of equipment doesnt invole cash, the value which is not concerned with cash i.e., which involves notes is not considered.
Value of equipment purchased which does not involve cash = 264000-(210000-34000)-38000 = $50000
Acceptance of notes payable = 100000 - 50000 = $50000
Particulars
Amount ($)
Cash from operating Activities
Net Income
15000
Add: Depreciation
loss on sale of Equipment (12000-9000)
Loss on sale of Land
Interest Paid
Income Tax Expense
48000
3000
5000
Cash Operating activities before working capital adjustments, and taxes
71000
Working Capital Adjustments
Add:
Increase in Accounts Payable
Increase in accrued payables
Increase in Doubtful debts
Less: Increase in Inventory (80000-55000)
Increase in Accounts Receivable (85000-70000)
Increase in prepaid Expenses (26000-18000)
Decrease in Accounts Payable (35000-10000)
-25000
-15000
-8000
-25000
Cash from operating activities before taxes and extraordinary items
-2000
Less: Extraordinary loss
Cash From operating activities before taxes
Less: Taxes
Cash from operating activities
-2000
Cash from investing activities
Add: Sale of Equipment
Add: Sale of Land (34000-5000)
Less: Purchase of Equipment
Less: Investment made
Less: Purchase of building
9000
29000
-38000
Cash from Investing Activities
0
Cash from financing Activities
Add: Issue of notes payable
Add: Issue of common stock
Less: Repurchase of own stock
Less: Redemption of bond payable
Less: Cash Dividend paid
Less: Interest Paid
-12000
Cash from financing activities
-12000
Net Increase / decrease in cash
-14000
Opening Cash Balance
28000
Closing Cash Balance
14000