Question

Prepare a Cash Flow Statement for Rocket Corp. for the year ended December 31, 2017. Use...

Prepare a Cash Flow Statement for Rocket Corp. for the year ended December 31, 2017.
Use the indirect method for the operating section. Use the balances provided below. [25
marks]
Rocket Corporation
Statement of Financial Position
At December 31,
2017 2016
Cash $65,000 $29,000
Accounts Receivable 87,000 59,000
Inventory 133,000 81,000
Investments in shares (FV-OCI) 63,000 84,000
Land 65,000 103,000
Equipment 390,000 430,000
Accumulated depreciation (117,000) (86,000)
Goodwill 124,000 173,000
Total Assets $810,000 $873,000
Accounts payable 12,000 51,000
Dividends payable 15,000 32,000
Notes Payable 220,000 335,000
Common shares 265,000 125,000
Retained earnings 288,000 284,000
Accumulated OCI 10,000 46,000
Total Liabilities &
Shareholders’ Equity
$810,000 $873,000
Additional information:
a. Net Income for 2017 was $19,000
b. In March 2017, Rocket purchased a plot of land for the future construction of a plant. In
November 2017, Rocket sold a different plot of land with original cost of $86,000 for proceeds
of $95,000.
c. April 2017 - Rocket retired notes payable in the amount of $140,000 by issuing common shares.
In December 2017, notes payable in the amount of $25,000 were issued in exchange for cash.
d. Fair Value - OCI investments were purchased in July 2017 for a cost of $15,000 (cash). At
December 31, 2017, the fair value of the portfolio was $63,000. There were no sales in FV-OCI
in 2017.
Intermediate Financial Accounting I - ADMN 3221H
Accounting Assignment #2
Professor Wallace Fall 2018 3
e. No equipment was purchased during the year. Rocket sold equipment - original cost $40,000 for
$21,000 (cash) on December 31, 2017. The related accumulated depreciation was $12,000.
f. Dividends on the common shares were declared as follows:
a. December 2017 - $15,000; paid January 2018
b. December 2016 -$32,000; paid January 2017
Rocket treats dividends paid as a financing activity.
g. Impairment in Goodwill was recorded in 2017 to reflect a decrease in the recoverable amount of
goodwill. No Goodwill was generated or removed in 2017 (other than impairment).

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Homework Answers

Answer #1

Answer:

Calculation of depreciation expense for 2017:

Depreciation expense for 2017 = Accumulated depreciation 2017 - Accumulated depreciation 2016 + Accumulated depreciation on assets sold

= 117,000 - 86,000 + 12,000 = 43,000

Purchase cost of plot = Land value in 2017 - (Land value in 2016 - Original cost of land sold)= 65,000 - (103,000 - 86,000) = 48,000

Loss on sale of equipment = Original cost - accumulated depreciation -sale value = $40,000 - $12,000 - $21,000 = $7,000

Profit from sale of land = Sale price - Cost price = $95,000 - $86,000 = $9,000

Cash Flow Statement for Rocket Corp. for the year ended December 31, 2017 is as below:

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