The comparative balance sheets for Pharoah Corporation show the following inform
ID: 2590498 • Letter: T
Question
The comparative balance sheets for Pharoah Corporation show the following information.
December 31
2017
2016
$33,500
$12,900
12,400
10,000
12,100
9,000
–0–
3,000
–0–
29,800
44,800
19,900
5,000
6,300
$107,800
$90,900
$3,100
$4,500
2,000
4,500
–0–
6,000
5,000
3,000
–0–
4,900
3,000
4,100
31,000
25,000
43,000
33,000
20,700
5,900
$107,800
$90,900
Additional data related to 2017 are as follows.
Prepare a statement of cash flows using the indirect method. Flood damage is unusual and infrequent in that part of the country. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
WITH Supplemental disclosures of cash flow information section
Your answer is partially correct. Try again.Explanation / Answer
Solution
Pharoah Corporation
Statement of cash flows
For the Year Ended December 31, 2017
Particulars
Amount ($)
Amount ($)
Cash flow from operating activities
Net Income (WN 1)
$ 14,800
Adjustment for non cash , non operating expenses and incomes and working capital changes
Loss on sale of equipment (WN 2)
4,100
Gain from flood damage to building
(8,100)
Depreciation expense (WN 3)
1,900
Patent amortization
1,300
Gain on sale of investment (WN 6)
(1,800)
Increase in accounts receivable (net) (WN 7)
(3,800)
Increase in inventory
(3,100)
Increase in accounts payable
2,000
(7,500)
Net cash provided by operating activities (A)
7,300
Cash flow from investing activities
Sale of investment (WN 6)
4,800
Sale of equipment (WN 2)
2,500
Purchase of equipment (WN 2)
(19,900)
Proceeds from flood damage to building (Total amount received $ 29,900+ $ 2000)
31,900
Net cash provided by investing activities (B)
19,300
Cash flow from financing activities
Payment of dividends
(4,900)
Payment of short-term note payable
(1,100)
Net cash used in investing activities (C)
(6,000)
Net increase or decrease in cash (A+B+C)
20,600
Add: Cash on 1 January 2017 (Opening cash balance)
12,900
Cash on 31 December 2017 (Closing cash balance)
33,500
Supplemental disclosures of cash flow information:
Particulars
Amount ($)
Cash paid during the year for:
Interest
2,000
Income taxes:
6,500
Non cash investing and financing activities
Retired note payable by issuing common stock
10,000
Purchased equipment by issuing note payable
16,000
26,000
Working Notes:
(1)Net Income = Difference between Retained earnings of 2017 and 2016 is net income.
= $ 20,700- $5,900
= $ 14,800
(2) Equipment Ledger Account
Debit Credit
Particular
Amount ($)
Particular
Amount ($)
To Balance B/d
19,900
By Accumulated depreciation
4,400
To (Balancing Figure)
By Cash (Sale)
2,500
Cash
19,900
By Profit / loss A/c (Loss on sale) (11,000-4,400-2,500)
4,100
Long term note payable
16,000
By Balance c/ d
44,800
Total
55,800
Total
55,800
(3) Accumulated Depreciation –Equipment Ledger Account
Debit Credit
Particular
Amount ($)
Particular
Amount ($)
To equipment (40% of $ 11,000)
4,400
By Balance b/ d
4,500
To Balance c/ d
2,000
By Profit / loss A/c (Current year depreciation) (Balancing figure)
1,900
Total
6,400
Total
6,400
(4) Building Ledger Account
Debit Credit
Particular
Amount ($)
Particular
Amount ($)
To Balance B/d
29,800
By proceeds from insurance (29,900+2000)
31,900
To Profit / loss A/c (Balancing figure)
8,100
By Accumulated depreciation
6,000
By Balance c/ d
0
Total
37,900
Total
37,900
(5) Accumulated Depreciation- Building Ledger Account
Debit Credit
Particular
Amount ($)
Particular
Amount ($)
To Building
6,000
By Balance b/ d
6,000
To Balance c/ d
0
Total
6,000
Total
6,000
(6) Investment Ledger Account
Debit Credit
Particular
Amount ($)
Particular
Amount ($)
To Balance B/d
3,000
By Cash (Sale)
4,800
To Profit /loss A/c (Gain on sale)-Balancing figure
1,800
Total
4,800
Total
4,800
(7) Increase in accounts receivable = ($ 12,400- $ 3,100) - ($ 10,000 – $ 4,500)
= $ 9,300 -$ 5,500
= $ 3,800
Particulars
Amount ($)
Amount ($)
Cash flow from operating activities
Net Income (WN 1)
$ 14,800
Adjustment for non cash , non operating expenses and incomes and working capital changes
Loss on sale of equipment (WN 2)
4,100
Gain from flood damage to building
(8,100)
Depreciation expense (WN 3)
1,900
Patent amortization
1,300
Gain on sale of investment (WN 6)
(1,800)
Increase in accounts receivable (net) (WN 7)
(3,800)
Increase in inventory
(3,100)
Increase in accounts payable
2,000
(7,500)
Net cash provided by operating activities (A)
7,300
Cash flow from investing activities
Sale of investment (WN 6)
4,800
Sale of equipment (WN 2)
2,500
Purchase of equipment (WN 2)
(19,900)
Proceeds from flood damage to building (Total amount received $ 29,900+ $ 2000)
31,900
Net cash provided by investing activities (B)
19,300
Cash flow from financing activities
Payment of dividends
(4,900)
Payment of short-term note payable
(1,100)
Net cash used in investing activities (C)
(6,000)
Net increase or decrease in cash (A+B+C)
20,600
Add: Cash on 1 January 2017 (Opening cash balance)
12,900
Cash on 31 December 2017 (Closing cash balance)
33,500