Shown below are comparative ba
January 18th, 2023
Shown below are comparative balance sheets for PearlIndustries.
|
Pearl IndustriesComparative Balance SheetsDecember 31 |
||||||
|---|---|---|---|---|---|---|
|
Assets |
2022 |
2021 |
||||
|
Cash |
$ 190,400 |
$ 61,600 |
||||
|
Accounts receivable |
246,400 |
212,800 |
||||
|
Inventory |
467,600 |
529,200 |
||||
|
Land |
224,000 |
280,000 |
||||
|
Equipment |
728,000 |
560,000 |
||||
|
Accumulated depreciation—equipment |
(184,800 |
) |
(89,600 |
) |
||
|
Total |
$1,671,600 |
$1,554,000 |
||||
|
Liabilities and Stockholders’ Equity |
||||||
|
Accounts payable |
$ 109,200 |
$ 120,400 |
||||
|
Bonds payable |
420,000 |
560,000 |
||||
|
Common stock ($1 par) |
604,800 |
487,200 |
||||
|
Retained earnings |
537,600 |
386,400 |
||||
|
Total |
$1,671,600 |
$1,554,000 |
||||
Additional information:
| 1. | Net income for 2022 was $260,400. | |
| 2. | Depreciation expense was $95,200. | |
| 3. | Cash dividends of $109,200 were declared and paid. | |
| 4. | Bonds payable amounting to $140,000 were redeemed for cash$140,000. | |
| 5. | Common stock was issued for $117,600 cash. | |
| 6. | No equipment was sold during 2022. | |
| 7. | Land was sold for its book value. |
Prepare a statement of cash flows for 2022 using the indirectmethod. (Show amounts that decrease cash flow witheither a – sign e.g. -45,000, or in parenthesis e.g.(45,000)).
Answer:
Solution:
| PEARLINDUSTRIES | ||
| Statement of Cash Flows[Indirect Method] | ||
| For Current Year EndedDecember 31, 2022 | ||
| Cash flows from operatingactivities: | ||
| Net Income | $ 260,400 | |
| Adjustments to reconcile net income tonet cash provided by operating: | ||
| Depreciation expense | $ 95,200 | |
| Changes in current operating assetsand liabilities: | ||
| Increase in Account Receivable[212800-246400] | $ (33,600) | |
| Decrease in Inventory[529200-467600] | $ 61,600 | |
| Decrease in accounts payable[109200-120400] | $ (11,200) | |
| Net cash flows from operating activities | $ 372,400 | |
| Cash flow from[used for] investingactivities: | ||
| Cash from sale of land[280000-224000] | $ 56,000 | |
| Cash used for purchase of equipment[560000-728000] | $ (168,000) | |
| Net cash flow from investingactivities (B) | $ (112,000) | |
| Cash flow from [used for] financingactivities: | ||
| Cash from sale of commonstock | $ 117,600 | |
| Cash used for payment ofbonds | $ (140,000) | |
| Cash used for dividends | $ (109,200) | |
| Net Cash flow from financingactivities (C ) | $ (131,600) | |
| Net Increase in cashflow | $ 128,800 | |
| Cash balance at December 31,2021 | $ 61,600 | |
| Cash balance at December 31,2022 | $ 190,400 |
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