Respuesta :
Answer and Explanation:
The preparation of the statement of cash flows using the indirect method is presented below:
Cash from operating activities
Net income $104,000
Adjustments made
Add: depreciation expense $37,000
Add: loss on sale of land -$9,000
Less: increase in account receivable -$22,000 (92,000 - $70,000)
Add: decrease in inventory $40,000 ($105,000 - $145,000)
Less: increase in prepaid rent -$7,200 ($14,400 - 7,200)
Less: Decrease in accounts payable -$16,000 ($75,000 -$91,000)
Less: decrease in interest payable -$5,000 ($7,000 - 12,000)
Add: increase in income taxes payable $1,000 ($16,000 - $15,000)
Net cash from operating activities $140,800 (A)
Cash from investing activities
Cash from sale of land $31,000
Less: purchase of investment in bonds -$115,000
Net cash used by investing activities -$84,000 (B)
Cash from financing activities
Cash dividend -$30,000
Net cash used by financing activities -$30,000 (C)
Net increase in cash $26,800 (A + B + C)
Add: cash at the beginning of the year $227,800
Year end cash balance $254,600
Non cash investing and financing activity $70,000
The minus sign represents the outflow of cash and a positive sign shows in the inflow of cash and the we did the same in above calculations
The preparation of Video Phones, Inc.'s Statement of Cash Flows, using the indirect method is as follows:
VIDEO PHONES, INC.
Statement of Cash Flows (indirect method)
For the Year Ended December 31, 2018
Net Income $104,000
Non-Cash Expenses:
Depreciation 37,000
Loss on Sale of Land 9,000
Cash from operations $150,000
Working Capital Changes:
Accounts receivable (22,000)
Inventory 40,000
Prepaid rent (7,200)
Accounts payable (16,000)
Interest payable (5,000)
Income tax payable 1,000
Net Cash Flow from operations $140,800
Cash Flows from Financing Activities:
Dividend payment ($30,000)
Cash Flows from Investing Activities:
Sale of land $31,000
Investment in bonds (115,000)
Net Cash Flow: investments ($84,000)
Net Cash Flows $26,800
Reconciliation of Cash:
Beginning Cash Balance $227,800
Net Cash Flows 26,800
Ending Cash Balance $254,600
Data and Calculations:
VIDEO PHONES, INC.
Income Statement
For the Year Ended December 31, 2018
Net sales $ 3,636,000
Expenses:
Cost of goods sold $ 2,450,000
Operating expenses 958,000
Depreciation expense 37,000
Loss on sale of land 9,000
Interest expense 20,000
Income tax expense 58,000
Total expenses 3,532,000
Net income $ 104,000
VIDEO PHONES, INC.
Balance Sheets
December 31
Assets 2018 2017 Difference
Current assets:
Cash $ 254,600 $ 227,800 +$26,800
Accounts receivable 92,000 70,000 +22,000
Inventory 105,000 145,000 -40,000
Prepaid rent 14,400 7,200 +7,200
Long-term assets:
Investments 115,000 0 +115,000
Land 220,000 260,000 -40,000
Equipment 290,000 220,000 +70,000
Accumulated depreciation (81,000) (44,000) +37,000
Total assets $ 1,010,000 $ 886,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 75,000 $ 91,000 -$16,000
Interest payable 7,000 12,000 -5,000
Income tax payable 16,000 15,000 +1,000
Long-term liabilities:
Notes payable 305,000 235,000 +70,000
Stockholders' equity:
Common stock 400,000 400,000 0
Retained earnings 207,000 133,000 +74,000
Total liabilities & stockholders’ equity $ 1,010,000 $ 886,000
Additional Information for 2018:
1. Investment in bonds = $115,000.
2. Cost of Land Sold $40,000 Cash Proceeds from Sale of Land $31,000
Loss on sale of land = $9,000 ($40,000 - $31,000)
3. Equipment Purchase $70,000 Note Payable $70,000; note payable due in three years.
4. Dividend paid = $30,000 ($104,000 - $74,000)
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