47CP - Horngren'S Financial And Managerial Accounting

Question

Preparing the statement of  cash flows-indirect statement This problem continues the Canyon Canoe Company situation from Chapter 13. Canyon Canoe Company's comparative balance sheet is shown below.  2019 amounts are assumed, but include several transactions from prior chapters.

Additional data fellow:

1. The income statement for 2019 included the following items:                                                Net income, \(417,000.                                                                                                            Depreciation expense for the year, \)34,330.                                                                  Amortization on the bonds payable, \(254. 
2. There were no disposals of property, plant and equipment during this year. All acquistions of PP&E were for cash except the land, which was acquired by issuing preferred stock.  
3. The company issued bonds payable with a face value of \)210,000, receiving cash of \(208,476.
4. The company distributed 4,000 shares of common stock in a stock dividend when the market value was \)4.50 per share. All other dividends were paid in cash.
5. The common stock, except for the stock dividend, was issued for cash.
6. The cash receipt from the note payable in 2019 is considered a financing activity because it does not relate to operations.                                                                                     Requirements                                                                                                                            Prepare the statement of cash flows for the year ended December 31, 2019, using the indirect method. 

Step-by-Step Solution

Answer

• Net cash from operating activities is$441,092.
• Net cash used in investing activities is $ 725,000.
• Net cash provided by financial activities is $795,476.

Step 1: Non-cash expenses:

Non cash expenses are those expenses for which cash is not required to expend to pay off the expenses.

Step 2: Cash flows statement using the indirect method

Canyon Canoe Company                                                             Statement of Cash Flows                                                  For the year ended December 31, 2019

Cash flows From Operating Activities:
Adjustments to Reconcile Iucre to Net Income Provided by Operating Activities:
Net Income	$417,000

Depreciation expense	$34,330
Amortization	$254
Add: Decrease in account receivables	$5,178
Less: Increase in merchandise inventory	($355)
Add: Decrease in office supplies	$105
Add: Decrease in prepaid rent	$2,000
Add: Increase in account payable	$2,145
Add: Increase in utilities payable	$450
Add: Increase in telephone payable	#375
Add: Increase in wages payable	$3,000

Less: Short term investment	($23,480)
Add: Increase in interest payable	$300
Add: Increase in unearned revenue	$150
Net cash provided/ (used) in operating activities	$441,092
Cash Flows From Investing Activities:
Less: Purchase of building	($575,000)
Less: Purchase of furniture & equipment	($150,000)
Net cash provided/ (used) in investing activities	($725,000)
Cash Flows From Financing Activities:
Issuance of common stock ($186,000+$150,000-$136,000-$18,000)	$182,000

Less: Dividend Paid ($33,000-$18,000)	($15,000)
Less: Mortgage payable	$405,000
Less: Notes Payable	$15,000
Less: Bonds issued	$208,476
Net cash provided/(used) in financing activities	$795,476
Net increase/ (Decrease) in cash	$511,568
Cash Balance, December 31, 2018	$12,125
Cash Balance, December 31, 2019	$523,693