Q45PGB - Horngren'S Financial And Managerial Accounting

Question

Using a spreadsheet to prepare the statement of cash flows— indirect method The 2018 comparative balance sheet and income statement of Attleboro Group, Inc. follow. Attleboro disposed of a plant asset at book value in 2018.

Prepare the spreadsheet for the 2018 statement of cash flows. Format cash flows from operating activities by the indirect method. A plant asset was disposed of for \(0. The cost and accumulated depreciation of the disposed asset was \)13,600. There were no sales of land, no retirement of common stock, and no treasury stock transactions. Assume plant asset and land acquisitions were for cash.

Step-by-Step Solution

Answer

Net increase/(decrease) in cash is ($1,500).      

 

Step 1: Statement of cash flows using indirect method

Attlebord Group Inc. Spreadsheet for statement of cash flows Year ended December 31, 2018
Panel A-Balance Sheet	Balance 31/12/2017		Transaction Analysis		Balance 31/12/2018
			Debit	Credit
Cash	$15,500					$14,000
Account receivables	$43,700			$1,700		$42,000
Land	$11,000		$25,400			$36,400
Plant Assets	$112,850		$8,400			$121,250
Accumulated Depreciation	($18,650)		($1,700)			($20,350)
Merchandise Inventory	$93,300		$3,500			$96,350
Total Assets	$257,700					$290,100
Accounts Payable	$26,000		$1,500			$24,500
Accrued Liabilities	$22,600			$1,300		$23,900
Common Stock	$121,000			$8,500		$129,500
Notes Payable (Long-Term)	$69,000		$13,000			$56,000
Retained Earnings	$19,100			$37,100		$56,200
Total Liabilities and Shareholder’s Equity	$257,700					$290,100
Panel B- Statement of Cash Flows
Cash Flows from Operating Activities
Net Income			$65,300
Adjustments to reconcile Net Income to Net cash provided by Operating Activities:
Depreciating Expense			$15,300
Decrease in account receivables			$1,700
Increase in merchandise inventory			$(3,500)
Decrease in account payable			$(1,500)
Decrease in accrued liability			$1,300
Net cash provided/ (used) in operating activities				$78,600
Cash flow from Investing Activities:
Purchase of plant			$(22,000)
Purchase of land			$(25,400)
Net cash provided/ (used) in Investing activities				$(47,400)
Cash flow from Financing Activities:
Issuance of common stock			$8,500
Payment of notes payable			$(13,000)
Dividend paid			$(28,200)
Net cash provided/ (used) in financing activities				$(32,700)
Net increase/ (decrease) in cash				$(1,500)
Add: Beginning cash balance				$15,500
Ending cash balance				$14,000

Step 2: Calculation of cash paid for purchase of plant

$\begin{array}{rcl}\mathbf{Cashpaid}& \mathbf{=}& \mathbf{Closingbalance}\mathbf{+}\mathbf{costofdisposedasset}\mathbf{-}\mathbf{-}\mathbf{openingbalance}\\ & \mathbf{=}& \mathbf{\$}\mathbf{121}\mathbf{,}\mathbf{250}\mathbf{+}\mathbf{\$}\mathbf{13}\mathbf{,}\mathbf{600}\mathbf{-}\mathbf{\$}\mathbf{112}\mathbf{,}\mathbf{850}\\ & \mathbf{=}& \mathbf{\$}\mathbf{22}\mathbf{,}\mathbf{000}\end{array}$

$\begin{array}{rcl}\mathit{D}\mathit{i}\mathit{v}\mathit{i}\mathit{d}\mathit{e}\mathit{n}\mathit{d}\mathit{P}\mathit{a}\mathit{y}\mathit{m}\mathit{e}\mathit{n}\mathit{t}& \mathbf{=}& \mathit{R}\mathit{e}\mathit{t}\mathit{a}\mathit{i}\mathit{n}\mathit{e}\mathit{d}\mathit{E}\mathit{a}\mathit{r}\mathit{n}\mathit{i}\mathit{n}\mathit{g}\mathit{s}\mathit{B}\mathit{e}\mathit{g}\mathit{i}\mathit{n}\mathit{n}\mathit{i}\mathit{n}\mathit{g}\mathit{B}\mathit{a}\mathit{l}\mathit{a}\mathit{n}\mathit{c}\mathit{e}\mathbf{+}\mathit{N}\mathit{e}\mathit{t}\mathit{P}\mathit{r}\mathit{o}\mathit{f}\mathit{i}\mathit{t}\mathbf{-}\mathit{R}\mathit{e}\mathit{t}\mathit{a}\mathit{i}\mathit{n}\mathit{e}\mathit{d}\mathit{E}\mathit{a}\mathit{r}\mathit{n}\mathit{i}\mathit{n}\mathit{g}\mathit{s}\mathit{E}\mathit{n}\mathit{d}\mathit{i}\mathit{n}\mathit{g}\mathit{B}\mathit{a}\mathit{l}\mathit{a}\mathit{n}\mathit{c}\mathit{e}\\ & \mathbf{=}& \mathbf{\$}\mathbf{19}\mathbf{,}\mathbf{100}\mathbf{+}\mathbf{\$}\mathbf{65}\mathbf{,}\mathbf{300}\mathbf{-}\mathbf{\$}\mathbf{56}\mathbf{,}\mathbf{200}\\ & \mathbf{=}& \mathbf{\$}\mathbf{28}\mathbf{,}\mathbf{200}\\ & & \end{array}$