Question

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Golden Corp., a merchandiser, recently completed its 2017 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, (5) Other Expenses are all cash expenses, and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes. The company’s balance sheets and income statement follow.

GOLDEN CORPORATION Comparative Balance Sheets December 31, 2017 and 2016
	2017				2016
Assets
Cash	$	165,000			$	108,100
Accounts receivable		84,500				72,000
Inventory		602,500				527,000
Total current assets		852,000				707,100
Equipment		337,600				300,000
Accum. depreciation—Equipment		(158,500	)			(104,500	)
Total assets	$	1,031,100			$	902,600
Liabilities and Equity
Accounts payable	$	89,000			$	72,000
Income taxes payable		29,000				25,600
Total current liabilities		118,000				97,600
Equity
Common stock, $2 par value		594,000				569,000
Paid-in capital in excess of par value, common stock		197,000				161,500
Retained earnings		122,100				74,500
Total liabilities and equity	$	1,031,100			$	902,600

GOLDEN CORPORATION Income Statement For Year Ended December 31, 2017
Sales				$	1,797,000
Cost of goods sold					1,087,000
Gross profit					710,000
Operating expenses
Depreciation expense	$	54,000
Other expenses		495,000			549,000
Income before taxes					161,000
Income taxes expense					23,400
Net income				$	137,600

Additional Information on Year 2017 Transactions

Purchased equipment for $37,600 cash.

Issued 12,100 shares of common stock for $5 cash per share.

Declared and paid $90,000 in cash dividends.

Required:
Prepare a complete statement of cash flows; report its cash inflows and cash outflows from operating activities according to the indirect method. (Amounts to be deducted should be indicated with a minus sign.)
  

Answer 1

Statement of cash flow :

Cash flow from operating activities
Net income		137600
Adjustment to reconcile net income to net cash flow from operating activities
depreciation expense	54000
Increase account receivable	-12500
Increase inventory	-75500
Increase account payable	17000
Increase income tax payable	3400
		-13600
Net cash flow from operating activities		124000
Cash flow from investing activities
Purchase equipment	-37600
Net cash used in investing activities		-37600
Cash flow from financing activities
Issue Common Stock	60500
Dividend paid	-90000
Net cash used in financing activities		-29500
Net cash flow		56900
Beginning cash		108100
Ending cash		165000