Question

The balance sheet for December 31, 2018, December 31, 2017, and the income statement for the...

The balance sheet for December 31, 2018, December 31, 2017, and the income statement for the year ended December 31, 2018, for Rocket Company follows.

Rocket Company

Balance Sheet

December 31, 2018 and 2017

2018   

2017

Assets

Cash

$ 25,000   

$ 20,000

Accounts receivable, net

60,000   

70,000

Inventory

80,000   

100,000

Land

50,000   

50,000

Building and equipment

130,000*  

115,000

Accumulated depreciation

(85,000)  

(70,000)

Total assets

$260,000   

$285,000

Liabilities and Stockholders' Equity

Accounts payable

$ 30,000   

$ 35,000

Income taxes payable

4,000   

3,000

Wages payable

5,000   

3,000

Current notes payable

50,000**

60,000

Common stock

110,000***

100,000

Retained earnings

  61,000   

  84,000

Total liabilities and stockholders' equity

$260,000   

$285,000

* During 2018 cash payments for building and equipment $15,000.

** During 2018 cash paid for retirement of notes payable $10,000.

*** During 2018 cash received from issuance of stock.

Rocket Company

Income Statement

For the Year Ended December 31, 2018

Sales

$500,000

Less expenses:

Cost of goods sold

$330,000

Selling and administrative expenses

90,000

   (includes depreciation of $15,000)

Interest expense

   5,000

Total expenses

425,000

Income before taxes

$ 75,000

Income tax expense

  30,000

Net income

$ 45,000

Note: Cash dividends of $68,000 were paid during 2018.

Required:

Prepare the statement of cash flows for 2018. (Present cash flows from operations using the indirect approach.)


Homework Answers

Answer #1
Cash Flow Statement
Net income
45000
Add
Depreciation 15000
Decrease in Inventory 20000
Decrease in AccountAccounts payable 5000
Increase in Income taxes payable
1000
Decrease inWages payable
2000 43000
Cash Flow From Operation 88000
Investment Activities
Purchase building and equipment -15000
Cash Flow for   Investment Activities -15000
Finance Activities
Retirement of notes payable -10000
issuance of stock 10000
Cash dividends -68000
Cash flow for Financing Actvities -68000
Increase in Casg Flow 5000
Cash at begiining of the year 20000
Cash at end of the year 25000
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