Question

Carla Co. reported $ 144,400 of net income for 2017. The accountant, in preparing the statement of cash flows, noted the following items occurring during 2017 that might affect cash flows from operating activities.

1.		Carla purchased 100 shares of treasury stock at a cost of $ 20 per share. These shares were then resold at $ 25 per share.
2.		Carla sold 100 shares of IBM common at $ 180 per share. The acquisition cost of these shares was $ 140 per share. There were no unrealized gains or losses recorded on this investment in 2017.
3.		Carla revised its estimate for bad debts. Before 2017, Carla’s bad debt expense was 1% of its net sales. In 2017, this percentage was increased to 2%. Net sales for 2017 were $ 528,300, and net accounts receivable decreased by $12,400 during 2017.
4.		Carla issued 500 shares of its $ 10 par common stock for a patent. The market price of the shares on the date of the transaction was $ 23 per share.
5.		Depreciation expense is $ 35,800.
6.		Carla Co. holds 40% of the Nirvana Company’s common stock as a long-term investment. Nirvana Company reported $ 26,200 of net income for 2017.
7.		Nirvana Company paid a total of $ 2,000 of cash dividends to all investees in 2017.
8.		Carla declared a 10% stock dividend. One thousand shares of $ 10 par common stock were distributed. The market price at date of issuance was $ 20 per share.

Prepare a schedule that shows the net cash flow from operating activities using the indirect method. Assume no items other than those listed above affected the computation of 2017 net cash flow from operating activities. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

	Statement of Cash Flows (Partial)
		$ TOTAL
Adjustments to reconcile net income to
	$
		$$ TOTAL

Answer 1

Solution:

Statement of Cash Flows (Partial)
Particulars		Amount
Cash flow from operating activities:
Net Income		$144,400.00
Adjustments to reconcile net income to net cash provided by operations:
Gain on sale of investment	-$4,000.00
Depreciation expense	$35,800.00
Share of income in Nirvana company ($26,200*40%)	-$10,480.00
Decrease in net accounts receivables	$12,400.00
Cash dividend from Nirvana ($2,000*40%)	$800.00
		$34,520.00
Net Cash provided by operating activities		$178,920.00

answered by: anonymous