Prepare the statement of cash flows—direct and indirect methods) To prepare the
ID: 2594947 • Letter: P
Question
Prepare the statement of cash flows—direct and indirect methods) To prepare the statement of cash flows, accountants for Vinson Electric Company have summarized 2016 activity in two accounts::
Cash
Beginning balance
61,500
Payments on accounts payable
446,000
Sale of long-term investment
21,300
Payments of dividends
27,900
Collections from customers
681,500
Payments of salaries and wages
139,200
Issuance of common stock
47,600
Payments of interest
25,500
Receipts of dividends
16,900
Purchase of equipment
31,700
Payments of other operating expenses
34,100
Payment of long-term note payable
41,100
Purchase of treasury stock
20,700
Payment of income tax
20,100
Ending Balance
42,500
Common Stock
Beginning balance
84,100
Issuance for cash
47,600
Issuance to acquire land
90,300
Issuance to retire note payable
25,000
Ending Balance
247,000
Vinson Electric’s 2016 income statement and balance sheet data follow:
Vinson Electric Company
Income Statement
Year Ended December 31,2016
Revenues:
Sales revenue
$689,200
Dividend revenue
16,900
Total revenue
706,100
Expenses and losses:
Cost of goods sold
$447,200
Salary and wage expense
126,400
Depreciation expense
19,900
Other operating expense
49,400
Interest expense
27,800
Income tax expense
17,100
Loss on sale of investments
1,100
Total expenses and losses
688,900
Net income
$ 17,200
Vinson Electric Company
Selected Balance Sheet Data
December 31, 2016
Increase
(Decrease)
Current assets:
Cash and cash equivalents
$ (23,000)
Account receivable
7,700
Inventories
(9,000)
Prepaid expenses
(5,000)
Land
90,300
Equipment, net
11,800
Long-term investments
(22,400)
Current liabilities:
Accounts payable
(7,800)
Interest payable
2,300
Salary payable
(12,800)
Other accrued liabilities
10,300
Income tax payable
(3,000)
Long-term not payable
(66,100)
Common stock
162,900
Retained earnings
(15,700)
Treasury stock
20,700
Requirements:
Prepare the statement of cash flows of Vinson Electric Company for the year ended December 31, 2016, using the direct method to report operating activities. Also prepare the accompanying schedule of noncash investing and financing activities.
Use Vinson Electric’s 2016 income statement and information from its selected balance sheet data to prepare a supplementary schedule of cash flows from operating activities by using the indirect method.
Req. 1
Vinson Electric Company
Statement of Cash Flows
Year Ended December 31, 2016
Cash flows from operating activities:
Receipts:
Collections from customers
Dividends received
Total cash receipts
$ -
Payments:
To suppliers ($?? + $??)
To employees
For interest
For income tax
Total cash payments
-
Net cash provided by operating activities
-
Cash flows from investing activities:
Purchase of equipment
Sale of long-term investments
Net cash used for investing activities
-
Cash flows from financing activities:
Issuance of common stock
Payment of long-term note payable
Payment of dividends
Purchase of treasury stock
Net cash used for financing activities
-
Net increase in cash
-
Cash balance, December 31, 2015
Cash balance, December 31, 2016
$0
Noncash investing and financing activities:
Total noncash investing and financing activities
$ -
Req. 2
Vinson Electric Company
Cash Flows from Operating Activities
Year Ended December 31, 2016
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation expense
Loss on sale of investments
Increase in accounts receivable
Decrease in inventories
Decrease in prepaid expenses
Decrease in accounts payable
Increase in interest payable
Decrease in salary payable
Increase in other accrued liabilities
Decrease in income tax payable
-
Net cash provided by operating activities
$ -
Prepare the statement of cash flows—direct and indirect methods) To prepare the statement of cash flows, accountants for Vinson Electric Company have summarized 2016 activity in two accounts::
Explanation / Answer
Requirement 1:
Requirement 2:
Note: The cash account provided shows the decrease in cash as $19000 ($61500 - $42500) while the selected balance sheet data shows decrease in cash and cah equivalents as $23000. Kindly re-check.
Vinson Electric Company Statement of Cash Flows For the Year Ended December 31, 2016 Cash Flows from Operating Activities: Receipts: Collections from customers 681500 Dividends received 16900 Total cash receipts 698400 Payments: To suppliers ($446000 + $34100) 480100 To employees 139200 For interest 25500 For income tax 20100 Total cash payments 664900 Net cash provided by operating activities 33500 Cash Flows from Investing Activities: Purchase of equipment -31700 Sale of long-term investments 21300 Net cash used for investing activities -10400 Cash Flows from Financing Activities: Issuance of Common stock 47600 Payment of long-term note payable -41100 Payment of dividends -27900 Purchase of treasury stock -20700 Net cash used for financing activities -42100 Net increase (decrease) in cash -19000 Cash balance, December 31, 2015 61500 Cash balance, December 31, 2016 42500 Noncash investing and financing activities: Issuance of common stock to acquire land 90300 Issuance of common stock to retire note payable 25000 Total noncash investing and financing activities 115300