Boca Inc. Balance Sheets December 31 Assets 2018 2017 Cash 40,800 48,400 Account
ID: 2593615 • Letter: B
Question
Boca Inc.
Balance Sheets
December 31
Assets
2018
2017
Cash
40,800
48,400
Accounts Receivable
87,800
38,000
Inventory
112,500
102,850
Prepaid Expenses
28,400
26,000
Long-term Investments
138,000
109,000
Plant Assets
367,000
242,500
Accumulated depreciation
(50,000)
(52,000)
Total
724,500
514,750
Liabilities and Stockholders' Equity
Accounts Payable
72,000
67,300
Accrued Expenses Payable
13,500
21,000
Dividends Payable
3,000
-
Bonds Payable
170,000
146,000
Common Stock
262,000
175,000
Retained Earnings
204,000
105,450
Total
724,500
514,750
Additional Information:
1. Old plant assets having an original cost of $57,500 and accumulated depreciation of $48,500 were sold for $1,500 cash.
2. A new plant asset was purchased directly in exchange for common stock valued at $42,000.
3. New bonds were issued at par for $60,000.
4. 2018 Net income was $154,480.
5. A $1,000 prior period adjustment was recorded in 2018 to correct an understatement of depreciation in 2015. The 2017 balance sheet is appropriately restated.
6. The increase in Long-term Investments was due to a purchase of investments.
Required
1. Prepare a 2018 statement of cash flows using the indirect method.
Boca Inc.
Balance Sheets
December 31
Assets
2018
2017
Cash
40,800
48,400
Accounts Receivable
87,800
38,000
Inventory
112,500
102,850
Prepaid Expenses
28,400
26,000
Long-term Investments
138,000
109,000
Plant Assets
367,000
242,500
Accumulated depreciation
(50,000)
(52,000)
Total
724,500
514,750
Liabilities and Stockholders' Equity
Accounts Payable
72,000
67,300
Accrued Expenses Payable
13,500
21,000
Dividends Payable
3,000
-
Bonds Payable
170,000
146,000
Common Stock
262,000
175,000
Retained Earnings
204,000
105,450
Total
724,500
514,750
Additional Information:
1. Old plant assets having an original cost of $57,500 and accumulated depreciation of $48,500 were sold for $1,500 cash.
2. A new plant asset was purchased directly in exchange for common stock valued at $42,000.
3. New bonds were issued at par for $60,000.
4. 2018 Net income was $154,480.
5. A $1,000 prior period adjustment was recorded in 2018 to correct an understatement of depreciation in 2015. The 2017 balance sheet is appropriately restated.
6. The increase in Long-term Investments was due to a purchase of investments.
Required
1. Prepare a 2018 statement of cash flows using the indirect method.
Explanation / Answer
BOCA INC.
CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31
$
$
CASH FLOW FROM OPERATING ACTIVITIES
Net Profit /Operating Profit Before Tax &Working Capital Changes
1,54,480.00
Adjustment For non cash items and working capital changes:
Loss on sale on old plant [(57500 - 48500) - 1500]
7,500.00
Depreciation [50000 - (52000-48500)]
46,500.00
Increase in Accounts receivable
(49,800.00)
Increase in inventory
(9,650.00)
Increase in prepaid expenses
(2,400.00)
Increase in Accounts payable
4,700.00
Decrease in Accrues Expenses payable
(7,500.00)
Increase in Dividend payable
3,000.00
NET CASH FROM OPERATING ACTIVITIES (A)
1,46,830.00
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Plant assets (367000 - [(242500-57500)+42000]
(1,40,000.00)
Sale of old Plant
1,500.00
Purchase of Long term investments
(29,000.00)
NET CASH FROM INVESTING ACTIVITIES (B)
(1,67,500.00)
CASH FLOW FROM FINANCING ACTIVITIES
Issue of new Bond
60,000.00
Retirement of old Bond (146000+60000-170000)
(36,000.00)
Issue of new shares of common stock (87000 - 42000)
45,000.00
Payment of dividend [204000 - (105450+154480)]
(55,930.00)
NET CASH FROM FINANCING ACTIVITIES (C)
13,070.00
NET CHANGES IN CASH AND CASH EQUIVALENTS (A+B+C)
(7,600.00)
ADD: OPENING CASH AND CASH EQUIVALENTS
48,400.00
CLOSING CASH AND CASH EQUIVALENTS
40,800.00
BOCA INC.
CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31
$
$
CASH FLOW FROM OPERATING ACTIVITIES
Net Profit /Operating Profit Before Tax &Working Capital Changes
1,54,480.00
Adjustment For non cash items and working capital changes:
Loss on sale on old plant [(57500 - 48500) - 1500]
7,500.00
Depreciation [50000 - (52000-48500)]
46,500.00
Increase in Accounts receivable
(49,800.00)
Increase in inventory
(9,650.00)
Increase in prepaid expenses
(2,400.00)
Increase in Accounts payable
4,700.00
Decrease in Accrues Expenses payable
(7,500.00)
Increase in Dividend payable
3,000.00
NET CASH FROM OPERATING ACTIVITIES (A)
1,46,830.00
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Plant assets (367000 - [(242500-57500)+42000]
(1,40,000.00)
Sale of old Plant
1,500.00
Purchase of Long term investments
(29,000.00)
NET CASH FROM INVESTING ACTIVITIES (B)
(1,67,500.00)
CASH FLOW FROM FINANCING ACTIVITIES
Issue of new Bond
60,000.00
Retirement of old Bond (146000+60000-170000)
(36,000.00)
Issue of new shares of common stock (87000 - 42000)
45,000.00
Payment of dividend [204000 - (105450+154480)]
(55,930.00)
NET CASH FROM FINANCING ACTIVITIES (C)
13,070.00
NET CHANGES IN CASH AND CASH EQUIVALENTS (A+B+C)
(7,600.00)
ADD: OPENING CASH AND CASH EQUIVALENTS
48,400.00
CLOSING CASH AND CASH EQUIVALENTS
40,800.00