Q33PGA
Question
Preparing the statement of cash flows—indirect method
Accountants for Morganson, Inc. have assembled the following data for the year ended December 31, 2018:
2018 2017 Current Assets: Cash \( 99,400 \) 25,000 Accounts Receivable 64,100 69,700 Merchandise Inventory 83,000 75,000 Current Liabilities: Accounts Payable 57,600 55,200 Income Tax Payable 14,800 16,800
Transaction Data for 2018:
Issuance of common stock for cash \( 38,000
Payment of notes payable \) 46,100
Depreciation expense 24,000
Payment of cash dividends 50,000
Purchase of equipment with cash 74,000
Issuance of notes payable to borrow cash 62,000
Acquisition of land by issuing long-term notes payable 119,000
Gain on sale of building 4,500 Book value of building sold 54,000
Net income 68,500
Prepare Morganton's statement of cash flows using the indirect method. Include an accompanying schedule of non-cash investing and financing activities.
Step-by-Step Solution
VerifiedAnswer
As per the cash flow statement, net change in the cash equals $74,400. And Total Non-cash Investing and financing activities equals $119,000
Morganson Inc. Statement of Cash Flows For the year ended December 31, 2018 | |
Cash Flows From Operating Activities: | |
Net Income | $68,500 |
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: | |
Depreciation expense | $24,000 |
Gain on sale of building | ($4,500) |
Decrease in account receivables | $5,600 |
Increase in merchandise inventory | ($8,000) |
Increase in account payable | $2,400 |
Decrease in tax payable | ($2,000) |
Net cash provided/ (used) in operating activities | $86,000 |
Cash Flows From Investing Activities: | |
Purchase of equipment | ($74,000) |
Sale of building | $58,500 |
Net cash provided/ (used) in investing activities | ($15,500) |
Cash Flows From Financing Activities: | |
Issuance of common stock | $38,000 |
Payment of notes payable | ($46,100) |
Issue of notes payable | $62,000 |
Dividend paid | ($50,000) |
Net cash provided/ (used) in financing activities | $3,900 |
Net increase/(Decrease) in cash | $74,400 |
Cash Balance, December 31, 2017 | $25,000 |
Cash Balance, December 31, 2018 | $99,400 |
Morganson Inc. Statement of Cash Flows (Partial) For the year ended December 31, 2018 | |
Non-cash Investing and financing activities | |
Acquisition of land by issuing long-term notes payable | $119,000 |
Total Non-cash Investing and financing activities | $119,000 |