Problem 12-8A Presented below are the financial statements of Ivanhoe Company. I
ID: 2590959 • Letter: P
Question
Problem 12-8A
Presented below are the financial statements of Ivanhoe Company.
Ivanhoe Company
Comparative Balance Sheets
December 31
Assets
2017
2016
Cash
$ 104,300
$ 59,600
Accounts receivable
59,600
41,720
Inventory
83,440
59,600
Property, plant, and equipment
178,800
232,440
Accumulated depreciation
(95,360
)
(71,520
)
Total
$330,780
$321,840
Liabilities and Stockholders’ Equity
Accounts payable
$ 56,620
$ 44,700
Income taxes payable
20,860
23,840
Bonds payable
50,660
98,340
Common stock
53,640
41,720
Retained earnings
149,000
113,240
Total
$330,780
$321,840
Ivanhoe Company
Income Statement
For the Year Ended December 31, 2017
Sales revenue
$721,160
Cost of goods sold
521,500
Gross profit
199,660
Selling expenses
$53,640
Administrative expenses
17,880
71,520
Income from operations
128,140
Interest expense
8,940
Income before income taxes
119,200
Income tax expense
23,840
Net income
$ 95,360
Additional data:
1.
Depreciation expense was $52,150.
2.
Dividends declared and paid were $59,600.
3.
During the year equipment was sold for $25,330 cash. This equipment cost $53,640 originally and had accumulated depreciation of $28,310 at the time of sale.
Further analysis reveals the following.
1.
Accounts payable pertain to merchandise suppliers.
2.
All operating expenses except for depreciation were paid in cash.
3.
All depreciation expense is in the selling expense category.
4.
All sales and purchases are on account.
IE
Prepare a statement of cash flows for Ivanhoe Company using the direct method. (Show amounts in the investing and financing sections that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
Compute Free Cash Flow
Problem 12-8A
Presented below are the financial statements of Ivanhoe Company.
Ivanhoe Company
Comparative Balance Sheets
December 31
Assets
2017
2016
Cash
$ 104,300
$ 59,600
Accounts receivable
59,600
41,720
Inventory
83,440
59,600
Property, plant, and equipment
178,800
232,440
Accumulated depreciation
(95,360
)
(71,520
)
Total
$330,780
$321,840
Liabilities and Stockholders’ Equity
Accounts payable
$ 56,620
$ 44,700
Income taxes payable
20,860
23,840
Bonds payable
50,660
98,340
Common stock
53,640
41,720
Retained earnings
149,000
113,240
Total
$330,780
$321,840
Ivanhoe Company
Income Statement
For the Year Ended December 31, 2017
Sales revenue
$721,160
Cost of goods sold
521,500
Gross profit
199,660
Selling expenses
$53,640
Administrative expenses
17,880
71,520
Income from operations
128,140
Interest expense
8,940
Income before income taxes
119,200
Income tax expense
23,840
Net income
$ 95,360
Additional data:
1.
Depreciation expense was $52,150.
2.
Dividends declared and paid were $59,600.
3.
During the year equipment was sold for $25,330 cash. This equipment cost $53,640 originally and had accumulated depreciation of $28,310 at the time of sale.
Further analysis reveals the following.
1.
Accounts payable pertain to merchandise suppliers.
2.
All operating expenses except for depreciation were paid in cash.
3.
All depreciation expense is in the selling expense category.
4.
All sales and purchases are on account.
IE
Prepare a statement of cash flows for Ivanhoe Company using the direct method. (Show amounts in the investing and financing sections that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
Compute Free Cash Flow
Explanation / Answer
Prepare a statement of cash flows for Ivanhoe Company using the direct method
Free cash flow=114730
Cash flow from operating activities Cash received from customer 703280 Cash paid to supplier (533420) Cash paid for expenses (19370) Cash paid for interest (8940) Cash paid for income tax (26820) Net cash flow from operating activities 114730 Cash flow from investing activity Sale of equipment 25330 Net cash flow from investing activity 25330 Cash flow from financing activity Dividend paid (59600) Repaid bonds payable (47680) Issue common stock 11920 Net cash flow from financing activity (95360) Net cash flow 44700 Beginning cash 59600 Ending cash 104300