Question

Mitch Company Comparative Balance Sheets December 31 Assets 2017 2016 Cash $ 68,000 $ 22,000 Accounts receivable 88,000 76,000 Inventory 167,000 189,000 Land 80,000 100,000 Equipment 260,000 200,000 Accumulated depreciation—equipment (66,000 ) (32,000 ) Total $597,000 $555,000 Liabilities and Stockholders’ Equity Accounts payable $ 39,000 $ 43,000 Bonds payable 150,000 200,000 Common stock ($1 par) 216,000 174,000 Retained earnings 192,000 138,000 Total $597,000 $555,000
Additional information:
1. Net income for 2017 was $93,000.
2. Depreciation expense was $34,000.
3. Cash dividends of $39,000 were declared and paid.
4. Bonds payable amounting to $50,000 were redeemed for cash $50,000.
5. Common stock was issued for $42,000 cash.
6. No equipment was sold during 2017. 7. Land was sold for its book value.
Prepare a statement of cash flows for 2017 using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000, or in parenthesis e.g. (15,000)). Mitch Company Statement of Cash Flows $ Adjustments to reconcile net income to $ $

Answer 1

Answer:

Please see the Cash Flow Statement of Mitch Company for December 31, 2017 as shown below:

Explanation:

Mitch Company      

Statement of Cash Flow      

As of December 31, 2017      

     

CASH FLOWS FROM OPERATING ACTIVITIES     $

Net Income      93,000

Adjustments to reconcile net income to      

net cash provided by operating activities:      

Depreciation on Fixed Assets      34,000

(Increase) Decrease in Current Assets:      

Accounts Receivables      (12,000)

Inventory      22,000  

Increase (Decrease) in Current Assets:      

Accounts Payable      (4,000)

Income Tax Payable      0  

NET CASH PROVIDED BY OPERATING ACTIVITIES     133,000  

CASH FLOWS FROM INVESTING ACTIVITIES      

Bonds Payable Redeemed      (50,000)

Purchase of Equipment      (60,000)

Sale of Land      20,000  

NET CASH USED IN INVESTING ACTIVITIES     (90,000)

     

CASH FLOWS FROM FINANCING ACTIVITIES      

Payment of Cash Dividends      (39,000)

Issuance of Common Stock      42,000  

NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES       3,000  

NET INCREASE (DECREASE) IN CASH     46,000  

Cash Balance, December 31 2016      22,000  

Cash Balance, December 31 2017      68,000