Prepare a statement of cash flows for Henderson ?Industries, Inc., for the year
ID: 2616743 • Letter: P
Question
Prepare a statement of cash flows for Henderson ?Industries, Inc., for the year ended December? 31, 2017?, using the indirect method.
Henderson Industries, Inc.
Income Statement
For the Year Ended December 31, 2017
Sales revenues
$950,000
Less: Cost of goods sold
378,000
Gross profit
$572,000
Less operating expenses:
Salaries and wages expense
$187,000
Insurance expense
14,500
Depreciation expense
48,400
Other operating expenses
88,000
Total operating expenses
337,900
Operating income
$234,100
Plus other income and less other expenses:
Interest expense
$5,900
Gain on sale of PP&E
3,000
Total other income and expenses
2,900
Income before income taxes
$231,200
Less: Income tax expense
69,360
Net income
$161,840
Henderson Industries, Inc.
Comparative Balance Sheets
December 31, 2017 and 2016
Assets
2017
2016
Current assets:
Cash
$472,000
$287,000
Accounts receivable
76,000
126,000
Inventory
335,000
211,000
Prepaid insurance
7,000
3,500
Total current assets
$890,000
$627,500
Property, plant, and equipment
$615,000
$600,000
Less: Accumulated depreciation
(151,000)
(112,000)
Investments
88,000
76,000
Total assets
$1,442,000
$1,191,500
Liabilities
Current liabilities:
Accounts payable (inventory purchases)
$56,000
$37,000
Wages payable
16,000
17,000
Interest payable
1,600
800
Income taxes payable
60,360
11,500
Other accrued expenses payable
6,800
3,000
Total current liablities
$140,760
$69,300
Long-term liabilities
60,000
20,000
Total liabilities
$200,760
$89,300
Stockholders' equity
Common stock
$603,000
$603,000
Retained earnings
638,240
499,200
Total stockholders' equity
$1,241,240
$1,102,200
Total liabilities and equity
$1,442,000
$1,191,500
Henderson Industries, Inc.
Comparative Balance Sheets
December 31, 2017 and 2016
Assets
2017
2016
Current assets:
Cash
$472,000
$287,000
Accounts receivable
76,000
126,000
Inventory
335,000
211,000
Prepaid insurance
7,000
3,500
Total current assets
$890,000
$627,500
Property, plant, and equipment
$615,000
$600,000
Less: Accumulated depreciation
(151,000)
(112,000)
Investments
88,000
76,000
Total assets
$1,442,000
$1,191,500
Liabilities
Current liabilities:
Accounts payable (inventory purchases)
$56,000
$37,000
Wages payable
16,000
17,000
Interest payable
1,600
800
Income taxes payable
60,360
11,500
Other accrued expenses payable
6,800
3,000
Total current liablities
$140,760
$69,300
Long-term liabilities
60,000
20,000
Total liabilities
$200,760
$89,300
Stockholders' equity
Common stock
$603,000
$603,000
Retained earnings
638,240
499,200
Total stockholders' equity
$1,241,240
$1,102,200
Total liabilities and equity
$1,442,000
$1,191,500
Explanation / Answer
Henderson Industries, Inc.
Statement of Cash Flows
For the year ended December 31, 2017
Working notes:
Income tax payable account
Property,plant and equipment account
Accumulated depreciation account
Interest payable account
Calculation of cash dividend paid
Net income = $161,840
Profit transferred to reatained earnings = 638,240 - 499,200
= $139,040
Hence, remaining profit must have been used as dividend paid = 161,840 - 139,040
= $22,800
I. Cash flows from operating activities Net income 161,840 Add: Income tax expense 69,360 Profit before tax 231,200 Adjustments for non-cash and non-operating expenses and gains: Depreciation expense 48,400 Interest expense 5,900 Less: Gain on sale of PP and E - 3,000 Operating profit before working capital changes 282,500 Decrese in accounts receivables 50,000 Increse in inventory -124,000 Increase in prepaid insurance - 3,500 Increase in accounts payable 19,000 Decrease in wages payable -1,000 Increase in other accrues expense payable 3,800 226,800 Less: tax paid - 20,500 Net cash flows from operating activities 206,300 II. Cash flows from Investing activities Purchase of property, plant and equipment - 21,400 Purchase of investment -12,000 Net cash flows from Investing activities - 33,400 III. Cash flows from Financing activities Increse in long term liabilities 40,000 Interest paid - 5,100 Cash dividend paid - 22,800 Net cash flows from financing activities 12,100 Net increase in cash (I + II + III) 185,000 Opening balance of cash 287,000 Closing balance of cash 472,000