17E
Question
Grant Wood Corporation’s balance sheet at the end of 2016 included the following items.
Current assets (\(Cash 82,000) | \)235,000 | Current liabilities | \(150,000 |
Land | 30,000 | Bond payable | 100,000 |
Building | 120,000 | Common stock | 180,000 |
Equipment | 90,000 | Retained earnings | 44,000 |
Accumulated depreciation – Building | (30,000) |
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Accumulated depreciation – Equipment | (11,000) |
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Patents | 40,000 |
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Total | \)474,000 | Total | \(474,000 |
The following information is available for 2017.
1. Net income was \)55,000.
2. Equipment (cost \(20,000 and accumulated depreciation \)8,000) was sold for \(10,000.
3. Depreciation expense was \)4,000 on the building and \(9,000 on equipment.
4. Patent amortization was \)2,500.
5. Current assets other than cash increased by \(29,000. Current liabilities increased by \)13,000.
6. An addition to the building was completed at a cost of \(27,000.
7. A long-term investment in stock was purchased for \)16,000.
8. Bonds payable of \(50,000 were issued.
9. Cash dividends of \)30,000 were declared and paid.
10. Treasury stock was purchased at a cost of $11,000.
Instructions
(Show only totals for current assets and current liabilities.)
(a) Prepare a statement of cash flows for 2017.
(b) Prepare a balance sheet at December 31, 2017.
Step-by-Step Solution
VerifiedThe balance sheet of the company totals $551,000.
Treasury stock is the initially issued shares of the company, which are now reacquired or repurchased from the shareholders.
Particular | Amount $ | Amount $ |
Cash flow from operations: |
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|
Net income | $55,000 |
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Add or less: Adjustments to net income |
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Loss on sale of equipment | 2,000 |
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Depreciation expenses | 13,000 |
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Amortization expenses | 2,500 |
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Increase in current assets | (29,000) |
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Increase in current liabilities | 13,000 |
|
Cash flow from operations |
| $56,500 |
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|
|
Cash flow from investing activities: |
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Sale of equipment | 10,000 |
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Building completed | (27,000) |
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Investment in stock | (16,000) |
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Cash flow used in investing activities |
| (33,000) |
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|
|
Cash flow from financing activities: |
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Cash dividend | (30,000) |
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Issuance of bonds | 50,000 |
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Treasury stock purchase | (11,000) |
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Cash flow from financing activity |
| 9,000 |
Net increase or decrease in cash |
| 32,500 |
Add: opening cash balance |
| 82,000 |
Ending cash balance |
| $114,500 |
Particular | Amount $ | Particular | Amount $ |
Current assets | $296,500 | Current liabilities | $163,000 |
Land | 30,000 | Bond payable | 150,000 |
Building | 147,000 | Common stock | 180,000 |
Equipment | 70,000 | Less: Treasury stock | (11,000) |
Accumulated depreciation – Building | (34,000) | Retained earnings | 69,000 |
Accumulated depreciation – Equipment | (12,000) |
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Patents | 37,500 |
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Long-term investment | 16,000 |
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|
Total | $551,000 | Total | $551,000 |