Question

Statement of Cash Flows—Direct Method The comparative balance sheet of Canace Products Inc. for December 31,...

Statement of Cash Flows—Direct Method

The comparative balance sheet of Canace Products Inc. for December 31, 20Y6 and 20Y5, is as follows:

Dec. 31, 20Y6 Dec. 31, 20Y5
Assets
Cash $237,320 $220,260
Accounts receivable (net) 85,970 79,110
Inventories 242,710 234,210
Investments 0 90,740
Land 124,480 0
Equipment 267,770 207,070
Accumulated depreciation (62,690) (55,840)
Total assets $895,560 $775,550
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors) $162,100 $152,780
Accrued expenses payable (operating expenses) 16,120 20,160
Dividends payable 8,960 6,980
Common stock, $10 par 48,360 38,000
Paid-in capital: Excess of issue price over par-common stock 181,800 105,470
Retained earnings 478,220 452,160
Total liabilities and stockholders’ equity $895,560 $775,550

The income statement for the year ended December 31, 20Y6, is as follows:

Sales $1,383,560
Cost of goods sold 569,700
Gross profit $813,860
Operating expenses:
Depreciation expense $6,850
Other operating expenses 718,450
Total operating expenses 725,300
Operating income $88,560
Other expense:
Loss on sale of investments (24,500)
Income before income tax $64,060
Income tax expense 20,500
Net income 43,560

Additional data obtained from an examination of the accounts in the ledger for 20Y6 are as follows:

Equipment and land were acquired for cash.

There were no disposals of equipment during the year.

The investments were sold for $66,240 cash.

The common stock was issued for cash.

There was a $17,500 debit to Retained Earnings for cash dividends declared.

Required:

Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

Canace Products Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y6
Cash flows from operating activities:
Cash received from customers $
Cash payments for merchandise
Cash payments for operating expenses
Cash payments for income taxes
Net cash flow from operating activities $
Cash flows from investing activities:
Cash received from sale of investments $
Cash paid for purchase of land
Cash paid for purchase of equipment
Net cash flow used for investing activities
Cash flows from financing activities:
Cash received from sale of common stock $
Cash paid for dividends
Net cash flow from financing activities
Change in cash $
Cash at the beginning of the year
Cash at the end of the year

Homework Answers

Answer #1
Cash flow Statement:
Cash flow form Operating activities:
Cash received from operating activities (1383560+79110-85970) 1376700
Cash paid for invetory purchase (569700+242710-234210+152780-162100) -568880
Cash paid for operating activities (718450+20160-16120) -722490
Income tax paid -20500
Net cash provided form operating activities: 64830
Cash flows from Investing activities:
Sale of investment 66240
Purchase of land -124480
Purchasse of equipment -60700
Net ccash usued in investing activities -118940
Cash flows from Financing activities:
Dividend paid (17500+6980-8960) -15520
Issue of common Stock 86690
Net cashprovidedd in financing activities 71170
Net cash increase 17060
Beginning cashs balance 220260
Ending cash balance 237320
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