Exercise 12-7 Shown below are comparative balance sheets for Mitch Company. Mitch Company Comparative Balance Sheets December 31 Assets 2017 2016 Cash $ 68,000 $ 22,000 Accounts receivable 88,000 76,000 Inventory 167,000 189,000 Land 80,000 100,000 Equipment 260,000 200,000 Accumulated depreciation—equipment (66,000 ) (32,000 ) Total $597,000 $555,000 Liabilities and Stockholders’ Equity Accounts payable $ 39,000 $ 43,000 Bonds payable 150,000 200,000 Common stock ($1 par) 216,000 174,000 Retained earnings 192,000 138,000 Total $597,000 $555,000 Additional information: 1. Net income for 2017 was $93,000. 2. Depreciation expense was $34,000. 3. Cash dividends of $39,000 were declared and paid. 4. Bonds payable amounting to $50,000 were redeemed for cash $50,000. 5. Common stock was issued for $42,000 cash. 6. No equipment was sold during 2017. 7. Land was sold for its book value. Prepare a statement of cash flows for 2017 using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000, or in parenthesis e.g. (15,000)). Mitch Company Statement of Cash Flows $ Adjustments to reconcile net income to $ $
statement of cash flows for 2017 using the indirect method.
Cash flow from operating activities | ||
Net income | 93000 | |
Adjustment to reconcile net income to cash flow from operating activities | ||
Depreciation expense | 34000 | |
Increase account receivable | -12000 | |
Decrease inventory | 22000 | |
Decrease account payable | -4000 | |
40000 | ||
Net cash flow from operating activities | 133000 | |
Cash flow from investing activities | ||
Sale of land | 20000 | |
Purchase of equipment | -60000 | |
Net cash flow from investing activities | -40000 | |
Cash flow from financing activities | ||
Redemption of bonds | -50000 | |
Dividend paid | -39000 | |
Issue common Stock | 42000 | |
Net cash flow from financing activities | -47000 | |
Net Cash flow | 46000 | |
Beginning cash | 22000 | |
Ending cash | 68000 | |
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