Indirect: Statement of cash flows P1 P2 P3 Golden Corp., a merchandiser, recentl
ID: 2593588 • Letter: I
Question
Indirect: Statement of cash flows P1 P2 P3 Golden Corp., a merchandiser, recently completed its 2015 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, (5) Other Expenses are all cash expenses, and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes. The company's balance sheets and income statement follow. GOLDEN CORPORATION Comparative Balance Sheets December 31,2015 and 2014 2015 Assets Accounts recelvable 3,000 71,000 Total current assets 848,000 704,000 . .335,000 299,000 58.000) (104.000 GOLDEN CORPORATION Income Statement For Year Ended December 31, 20IS 25000 $899 000 Liabilities and Equity Accounts payable Income taxes payable Total current lablities.... Equity 87000 $ 71,000 Sales $1,792,000 28000 25,000 115000 96,000 1.086 000 706.000 Operating expenses Deprectation expense $ 54.000 Paid-in capital in excess 94000 548000 158.000 22000 136,000 494.000 Retained earnings Total lablities and equity 196.000 160,000 22000 75,000 Income before taxes Income taxes expense Net income 74 Additional Information on Year 2015 Transactions a. Purchased equipment for $36,000 cash. b. Issued 12,000 shares of common stock for $5 cash per share. c. Declared and paid $89,000 in cash dividends. Required Prepare a complete statement of cash flows; report its cash inflows and cash outflows from operating activities according to the indirect method.Explanation / Answer
Solution:
Statement of Cash Flow
GOLDEN CORPORATION
Statement of Cash Flow (Indirect Method)
For the Year Ended December 31, 2015
Cash Flow from Operating Activities:
$$
$$
Net Income
$136,000
Adjustments to reconcile Net Income to net cash provided by operating activities
Income Statement Items not affecting cash
+
Depreciation Expenses (Non cash item)
$54,000
+
Income Tax Expenses (Separate treatment)
$22,000
Changes in current operating assets and liabilities
-
Increase in Accounts Receivable, net (83,000 - 71,000)
-$12,000
-
Increase in Inventory (601,000 - 526,000)
-$75,000
+
Increase in Accounts Payable (87,000 - 71,000)
$16,000
Cash generation from operations
-
Cash payment for Income Tax (Refer Note 1)
-$19,000
Net Cash generated from Operative Activities
$122,000
Cash Flow from Investing Activities:
-
Cash payment for Purchase of Machinery
-$36,000
Net Cash Flow from Investing Activities
-$36,000
Cash Flow from Financing Activities:
+
Cash received from issuance of Common Stock (12,000 shares x $5)
$60,000
-
Dividend Paid
-$89,000
Net Cash Flow from Financing Activities
-$29,000
Net Increase/(Decrease) in Cash
$57,000
Cash at the beginning of the year
$107,000
Cash at the end of the year
$164,000
Note 1 – Cash Paid for Income Tax
Note 1 --- Income Tax Expenses
Cash Payment for Income Tax (Bal. figure)
19000
Beg. Bal
25000
Ending Bal
28000
Income Tax Expense recorded
(Income statement)
22000
47000
47000
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GOLDEN CORPORATION
Statement of Cash Flow (Indirect Method)
For the Year Ended December 31, 2015
Cash Flow from Operating Activities:
$$
$$
Net Income
$136,000
Adjustments to reconcile Net Income to net cash provided by operating activities
Income Statement Items not affecting cash
+
Depreciation Expenses (Non cash item)
$54,000
+
Income Tax Expenses (Separate treatment)
$22,000
Changes in current operating assets and liabilities
-
Increase in Accounts Receivable, net (83,000 - 71,000)
-$12,000
-
Increase in Inventory (601,000 - 526,000)
-$75,000
+
Increase in Accounts Payable (87,000 - 71,000)
$16,000
Cash generation from operations
-
Cash payment for Income Tax (Refer Note 1)
-$19,000
Net Cash generated from Operative Activities
$122,000
Cash Flow from Investing Activities:
-
Cash payment for Purchase of Machinery
-$36,000
Net Cash Flow from Investing Activities
-$36,000
Cash Flow from Financing Activities:
+
Cash received from issuance of Common Stock (12,000 shares x $5)
$60,000
-
Dividend Paid
-$89,000
Net Cash Flow from Financing Activities
-$29,000
Net Increase/(Decrease) in Cash
$57,000
Cash at the beginning of the year
$107,000
Cash at the end of the year
$164,000